Funding capacity in focus for Resimac

Like many of its peers, Resimac has successfully grown its loan-origination volume in recent years – and has ambitions for further expansion, including in New Zealand. Andrew Marsden, general manager, treasury and securitisation at Resimac in Sydney, discusses business plans and how they will be funded.

Resimac has a stated goal of expanding its presence in the broker space. Can you give an update on how the broker business has evolved and how successful Resimac has been at building market share?

Around 2010, Resimac began building out a targeted broker strategy with a first investment through a joint venture in a broker-aggregator firm called Finsure. This has been very successful over the years and the strategy accounts for a substantial amount of flow into our prime and nonconforming books.

We have since divested from Finsure, though we maintain a strategic stake. But what the investment demonstrated to us is the quality of collateral as well as the volume we are able to realise through the broker-aggregator space.

The royal commission had an adverse effect on sentiment across the market – not just in the broker space. From the final quarter of 2018 through to the end of the royal commission there was a drop off in volume coming through from brokers. But this was in line with a fall in system growth. In our view the drop was driven by sentiment from both brokers and borrowers.

We took comfort from the way in which the broker industry consolidated to highlight the strengths and attributes of the sector. Politicians on both sides took notice of this and understood the importance of the sector. We now think it will have an even more entrenched role in the distribution of credit going forward.

We have in the past heard interest from Resimac in how it can capture things like housing-emissions data. What is the status of Resimac’s interest in sustainable lending – and perhaps debt issuance?

We aim to enhance our systems so we can capture more data relating to the properties we are lending against in general. This includes the renewable-energy and other green attributes of a property. We see green securitisation as a potential component of our issuance strategy and we also see opportunities to offer a green mortgage product.

How else is Resimac hoping to drive growth in loan origination?

Prime mortgages account for around 80 per cent of our flow and we have rolled out successful initiatives to attract major-bank-type borrowers into this programme. We have seen similar strategies deployed by others in the nonbank space and there has been success across the sector.

We continue to see the possibility for growth in the prime space because of the sheer size of the market itself. Growth will always be limited by the capacity of our term securitisation programme, though.

The prime securitisation programme is our bread and butter and nonconforming is a natural adjunct to this. The specialist-lending products we offer to the market have a degree of homogeneity, though – we are not chasing SME borrowers or nonresidential lending at the moment, for example.

How are you seeking to address the capacity constraints in securitisation?

Our organisation has a clear objective to diversify funding sources and issuance jurisdictions. We are cognisant of the volume limitations of various issuance programmes, particularly residential mortgage-backed securities (RMBS). We place a lot of focus on our domestic and offshore funding capabilities but at the same time we are aware that the RMBS programme itself has a finite volume limit – which applies to prime and nonconforming.

If the strategy of the organisation was to have continued material growth in its asset portfolio, we would look at different forms of wholesale funding – potentially away from securitisation. However, this does not form part of our current strategy.

Can you tell us a bit about the growth opportunity and funding nexus in New Zealand? Specifically, does the ability to fund a New Zealand dollar book in the local capital market allow Resimac to match its growth ambitions?

New Zealand really excites us, both from an asset-origination perspective and the way in which the securitisation market has been developing over recent years. There is real interest in public securitisation deals and we think this will only increase as and when the biggest banks start issuing. If they look to establish public securitisation programmes it will be a very positive development for New Zealand capital markets as a whole.