KEY POINTS:
Mortgage securitisation continues to show signs of taking off in New Zealand with Christchurch's Property Finance Group planning to more than double its programme to $800 million over the next 12 months.
Mortgage securitisation is how non-bank lenders such as finance companies and building societies can fund their lending. It involves the packaging up of a large number of loans into a vehicle that can be sold in units to institutional investors.
In a regulatory filing to the NZAX market yesterday, Property Finance Group said it intended to securitise up to $450 million in residential loans, $300 million in commercial property loans and about $50 million in reverse mortgage loans in the next 12 months.
To date the company has securitised about $370 million worth of mortgages.
PFG managing director Darryl Queen was confident the numbers represented the amount of business the company would do over the coming year.
He said the company had been writing residential property loans at the rate of about $40 million a month over the past three months, all of them coming via mortgage brokers.
Queen, like others in the non-bank finance sector, sees increasing opportunities because of the major banks' move away from using brokers, who between them handled about 40 per cent of the home loans written last year.
The major banks that still use brokers are currently reviewing the commissions they pay them.
"I don't think it's any secret, to be frank, that the brokers are feeling a little bit tender about their relationships with the banks," said Queen.
"There are opportunities for players like us with the brokers in a more partnership-style environment."
New Zealand Finance, the co-owner of Mike Pero Mortgages, recently said it was considering offering Mike Pero-branded home loans which would also be funded through its securitisation programme. Queen said mortgage securitisation was "bread and butter" overseas and New Zealand was "just catching up".
In the United States, only a minority of mortgage debt is now held by banks. Most, about US$6.5 trillion ($8.8 trillion), has been securitised and is held by Wall Street investment vehicles.
Concerns about the soundness of the riskier "subprime" end of that market caused some wobbles on US markets recently.
"You've got to remember that's a very, very tiny part of the overall market," said Queen. "We're not subprime lenders. Our philosophy is prime stuff - high volume, low margin, low risk, sleep at night and have a sustainable business on that basis."
Seizing the day
* Property Finance Group is to boost its mortgage securitisation programme this year to $800 million.
* It says it needs to fund about $40 million a month in residential loans via mortgage brokers as well as its commercial property and reverse mortgage loans.
* Property Finance Group and other non-bank lenders are betting on more business from mortgage brokers as the major banks look to move away from using them.
