A non-bank lender has released data around the impact the COVID-19 crisis has had on its mortgage loan book in a bid to restore confidence in the frozen residential mortgage-backed securities (RMBS) market.
Firstmac Limited shared a report on each of the 24 trusts in its $12.8bn loan book which shows that as of April 30, 2020, just 5.26% of mortgage holders had applied for hardship arrangements that would reduce or suspend their mortgage repayments – data which reflects conditions more than a month after the introduction of social distancing and the shutdown of the tourism industry and indoor venues which caused widespread job loss.
According to managing director Kim Cannon, the hardship numbers were less than “even the most optimistic forecasts” of 6% to 9%, and far below the level which could have led to deferred RMBS coupon payments to investors.
“Investors have been on tenterhooks waiting for this information to see if Australian RMBS are in trouble, so this is a huge piece of good news for them,” Cannon said.
“This data will give confidence back to investors so they can keep investing in RMBS knowing that the level of hardship is very manageable. It is just a small fraction of what our RMBS could withstand.”
Cannon attributed the figures to Firstmac’s strong prime loan book, its personalised approach to working with borrowers, and effective government measures like JobSeeker payments which have helped to mitigate the financial impact of the shutdowns.
“Many hardship applicants have chosen to continue making some level of repayments that they are comfortable with, leaving them better off in the long run," he added.
“At the start of this crisis, we rejected a one-size-fits-all approach to hardship and resolved to work with each customer individually to help them tailor the best arrangement for their unique circumstances."
