The Australian Office of Financial Management has rejected calls from participants in the securitisation industry to use its government authority to invest in the RMBS market to buy stock in the secondary market.AOFM chief executive Neil Hyden said on Friday that his organisation would use the $8 billion allocated for investment in RMBS to support issuers in the primary market.While Hyden rejected the call to trade in the secondary market, he said the AOFM was considering a number of other matters that had been raised by the industry and would be fine-tuning its process for the next round of mandates.Treasurer Wayne Swan announced on September 26 that up to $8 billion would be allocated to the AOFM for investment in RMBS, with $4 billion of that to be allocated to non-ADI issuers.FirstMac and Members Equity Bank were selected for the first two mandates, each qualifying for $500 million of AOFM money. Challenger Mortgage Management and Resimac were selected for the second round, which will be completed by the end of the year.The industry is worried that because a large amount of RMBS stock continues to hang over the market, the government's attempts to use its debt management agency to kick-start the market will fall short.Hyden, who was speaking at last week's Australian Securitisation Forum conference, said the goal of the government's move to support the RMBS market was to maintain competition in the mortgage market. By supporting new issues the AOFM could back originators that were prepared to use the funds to lend.Hyden said: "One of our criteria is the extent the funds will be used to originate new residential mortgages and not some other purpose, such as clearing a warehouse."We are not looking to support the secondary market at this stage. There is no assurance that funds would be used for lending."Hyden said he had taken note of feedback from investors about tight deadlines. Investors had complained they were not given enough time to review the information memoranda before the first two offers closed.Hyden said the timing had been influenced by a desire to get the first two rounds completed by Christmas. "It may be a little more leisurely in future," he said.Others have called for the AOFM to broaden the scope of its market support and invest in CMBS and in tranches below AAA-rated notes. Hyden said both questions were matters for government, which had stipulated AAA-rated RMBS in its brief to the AOFM.He said there might be scope for greater flexibility on the LVR limits. The AOFM's request for proposals set among its minimum requirements a maximum LVR of 95 per cent on individual loans and a weighted average LVR of not more than 70 per cent."We are looking for a balance between high quality loans and support for competition in lending across a broad range of borrowers. My own preference would be to look at the distribution curve of the LVRs and not just one or two parameters."But there is a need for clarity. We may