Resimac seeks smoothest path

As one of Australia’s most experienced nonbank originators, Resimac is well positioned to ride out the storm of 2020. Andrew Marsden, the firm’s Sydney-based general manager, treasury and securitisation, discusses its funding and lending strategy.

Resimac has remained very active in funding markets throughout 2020. What approach has it taken to funding this year?

Resimac has been public in stating that its focus was to manage the business in a way that there would be minimal disruption to its ability to offer mortgage products, in light of a COVID-19-affected marketplace.

While we have been more selective in the type of credit we have been underwriting, by and large volume has remained at pre-COVID-19 levels. We are now re-engaging with offshore investors, including the US dollar 144A market.

Has COVID-19 altered the strategy for accessing offshore markets?

Yes, it has – both the timing and format of our offerings. Throughout the height of COVID-19, we always wanted to tread carefully in the markets in which we operate. At the same time, we needed to be consistent with our issuance patterns, particularly in the US dollar market.

As far as contingencies are concerned, we deferred a US dollar transaction we were marketing in February and executed in Septmber. During March, our focus turned to strengthening our bank facilities for the possibility that capital markets would be constrained, or even closed, for a period of time. We think we have a relatively strong level of bank support if any challenges arise in issuing in public capital markets.

The major banks have significantly dropped their interest rates for prime mortgage borrowers. How is Resimac responding to this competition?

As far as our prime origination strategy is concerned, we remain competitive on price with the major banks particularly in the variable-rate segment of the market.

The positioning of our prime business is such that we offer similar products and prices to those of the major banks but our service proposition is generally better, with the ability to turn around credit decisions within 24 hours in most instances. The prime business is a critical part of our growth strategy so it’s vital we maintain our presence even though we have a small comparative market share.

Throughout COVID-19, we have refocused our positioning in the prime offering space to the lower-LVR [loan-to-value ratio] segment of the market. We have distinct price points now at 60-70 per cent LVR and we have been reasonably successful in maintaining, if not increasing, volume in this part of the market.

Resimac recorded home-loan portfolio growth of 21 per cent in the 2019/20 financial year. Circumstances for credit provision are likely to be very different this year, however. Do you have a target level of growth and how are you ensuring the quality of borrowers remains robust?

The forecast for growth will largely be in line with system credit growth. We expect there will continue to be challenges and opportunities in the origination market over the course of the year and we will look to pursue production opportunities where we are comfortable with the risk and funding.

We are fortunate to have an adaptive business model where we can be defensive or strategic in the way we face competitive challenges in origination markets.

As far as the quality of our book is concerned, we have one of the most stringent approaches to underwriting – including the prime and nonconforming spaces. We have effective tools to respond to changes in the lending market and can be quick to change credit policy if we see a deterioration in the business cycle or housing sector. This has been key to our asset-liability management focus throughout COVID-19.

Resimac printed the first New Zealand securitisation deal in 2020, in September. How is the New Zealand side of the business performing?

We remain very excited about prospects in the New Zealand market. There are reasonable growth opportunities, particularly in the prime sector. We think the economic recovery from the pandemic will be more pronounced than the one in Australia, which should play into the way we originate and issue residential mortgage-backed securities (RMBS) in New Zealand.

We will continue to strengthen our origination, servicing and funding capabilities to maintain a prominent profile in the nonbank sector. New Zealand is a naturally fertile fixed-income market with comparatively strong retail awareness of debt products. We believe this dynamic should foster domestic support for RMBS, particularly as local superannuation and annuity funds grow.