Ambitious non-bank lender Mortgage House has priced its second RMBS deal in as many years, raising around A$400 million to fund further loan activities.
The speed at which all tranches of pass-through notes were fully subscribed shows how hungry fixed income investors have become in their search for new offerings paying a healthy coupon rate.
The term sheet and ratings agency reports show the collateral pool consisted of about $400 million in home loans – primarily full doc – originated by Mortgage House of Australia Pty Limited and its related entity, Well Nigh Pty Limited.
By way of comparison, Mortgage House's inaugural A$300 million RMBS deal, launched in mid-May 2019 – and backed by a similar mix of residential mortgages – took one week to be fully subscribed.
This time, however, investors piled onto the company's latest offering: "Twenty-four hours after launch [on Tuesday] it was a done deal," said Ken Sayer, Mortgage House founder and chief executive officer.
Looking at some of the details on the term sheet and rating agency reports for the Mortgage House RMBS Series 2020-1 transaction:
• there were nine classes of notes, headed by class A1 and class A2 Notes, totalling $340 million and $28 million, respectively; • the top two classes of notes were priced at 1.50 per cent and 1.95 per cent over one-month BBSW, respectively; • the structure also included $7.4 million of class AB notes, priced at 2.2 per cent over BBSW; and • all three tranches were rated AAA(sf) by both Standard & Poor's and Fitch.
"These notes benefit from credit enhancement of 15.00 per cent, 8.00 per cent and 6.15 per cent, respectively," Fitch stated in a report to investors.
The next series of notes cascaded from class B to class F were rated by S&P, but not by Fitch, and totalled $24 million. Pricing for these notes ranged from 2.5 per cent over 1-month BBSW to 8.0 per cent over the swap rate, respectively.
The $1.2 million class G notes were not rated by either agency and pricing was undisclosed.
The collateral pool had a weighted average LVR of 60.89 per cent, mostly (66.5 per cent) owner occupied. The pool included 1.77 per cent low doc loans, and 1.83 per cent were rated as "loans in hardship".
Sayer told Banking Day that he was confident of his business will continue to increase, using technology to "micromanage" all loans, and expected to return to the capital markets seeking further RMBS funding "early next year".
As with the previous 2019 transaction, Westpac Banking Corporation was the arranger, and also one of the joint lead managers, along with National Australia Bank.