Westpac Thaws Frozen RMBS Market

Post by Sharat on December 16, 2009 · Under Australian Economy, Business News, Capital Markets, Company News, banking, mortgages · Comment

On Monday, Australian banking major Westpac moved to re-open the once frozen market for residential mortgage backed securities (RMBS), launching a $1 billion offering.

Although there have been a number of smaller offerings issued by regional lenders without the use of the government guarantee recently. The Westpac deal is the first issue of RMBS by a major lender since May 2007, when the market effectively closed as a result of the global financial crisis.

Asset backed securities constituted about one-third of Australia’s credit market in 2007, with RMBS issues accounting for more than half that amount. Since the market froze over, issuance slowed to a virtual standstill, and fell more than 40 per cent from its peak in June 2007.

So far this year, smaller regional lenders have issued approximately $3 billion of RMBS, requiring no assistance from the federal government in order to be able to do so.

Analysts say that the falling supply of RMBS and the high quality of underlying mortgage loans relative to other countries will encourage the resumed growth of the market for such securities.

The Westpac RMBS is made up of three year old mortgages with a weighted average loan-to-value ratio of 58.28 per cent. Pricing of the transaction is expected sometime this week.

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