Brighten's growth focus
Adam Moore, director, head of funding and securitisation at Brighten Home Loans in Sydney, discusses the market entrant’s funding journey so far and plans for public securitisation issuance.
What is the Brighten business story?
Brighten is an Australian-owned and regulated nonbank lender, responsible for the origination, underwriting, servicing, and funding of its mortgage portfolio. The business was established in 2017 and is wholly owned by Real Asset Management (RAM).
We saw an opportunity in the nonbank space as a result of regulatory changes in 2016 and 2017 that favoured the sector and we launched with an innovative product offering that includes home loans for nonresident borrowers. It was becoming increasingly difficult for existing lenders in the space to fund these loans, so there was an opportunity to enter the market in a profitable, high-margin niche, supported by the backing of RAM and its asset-management expertise.
We have grown the portfolio profitably and invested in processes, people, and technology solutions that will allow us to expand the business further. Our end-to-end digital mortgage platform gives us cost and service efficiencies and the flexibility that comes with not having any legacy issues.
We have broadened our product range to offer prime and near-prime, nonresident and construction loans, growing our assets under management to more than A$500 million (US$364.2 million). We are actively recruiting and investing in the growth of our broker network, including aggregator channels, in support of achieving a targeted A$2 billion loan book in two years.
What challenges has COVID-19 brought for Brighten’s origination and how has the company responded?
There were challenges across the board. However, we were able to respond rapidly and put the necessary adjustments in place with minimal disruption to the business.
We have a cloud-based mortgage platform so could shift quickly and seamlessly to working remotely. Our team is already located in five locations so it was not too much of a hurdle to overcome.
From a credit perspective, we have been monitoring our borrowers’ situations very closely. We have also been careful with new origination and tightened our servicing criteria to include additional tests on rental reliance, as well as additional underwriting and verification steps.
We did not make any material policy changes but did look at how some of our policies were implemented. We communicated these changes to brokers and did not have to close any of our distribution channels, while still ensuring we write quality business. The credit quality of the portfolio is demonstrated by the excellent asset performance since inception.
How has Brighten funded its lending to date and what plans do you have for the short and medium term?
We have two warehouse-funding arrangements in place with international investment banks. We also have funding diversification through a wholesale credit fund on the asset-management side of the business.
This reliable and stable funding platform gives us flexibility in the types of loans we write.
The short-to-medium term plan is to build our funding lines as we believe it is an ideal time to expand our lending business into the growing prime and near-prime loan segments. We believe we will be able to compete through a combination of streamlined product offering, simple and competitive pricing structure, and superior service proposition.
While we have proven capability in originating, servicing and funding, we understand the need to show track record as we move into new products. Fortunately, Brighten has celebrated several milestones including the formation of partnerships with leading mortgage aggregators and some of Australia’s best-known brands, which will help build the portfolio and further demonstrates our capability and commitment to becoming a major nonbank lender.
We are actively engaging potential funders to develop new funding lines, which will enable us to scale our growth and enter new product segments. While we can fund the initial growth period ourselves, our development is focused on securitisation-friendly products, as we see securitisation as the platform for funding growth.
Nonresident residential mortgage-backed securities (RMBS) issuance is a nascent product in Australia. Have you had much interaction with institutional investors on this type of lending?
We now have a solid track record with our nonresident loan book and a portfolio that is nearing sufficient size to engage the market on a public transaction. Brighten will be a first-time issuer so we are embarking on the education process to help investors and other market participants understand our model.
Our first public securitisation deal will be a nonresident RMBS. However, as the portfolio grows we also plan to be a regular issuer in the domestic space.
nonbank Yearbook 2023
KangaNews's eighth annual guide to the business and funding trends in Australia's nonbank financial-institution sector.