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Transcript of Housing Finance Summit Amelia Island, Florida Annual discussion of Housing Market : Investing,...
Housing Finance SummitAmelia Island, Florida
Annual discussion of Housing Market : Investing, Origination and
Public Policy
04 – 06 April 2005
South African Mortgage Market
Overview
Sophisticated mature – R300billionDichotomous Dominated by Big 4 BanksSound legal structure – title & foreclosureWide margins – no real competitionNo non bank lendingBanks “cash rich” – no shortage of capitalCredit data good
0
50
100
150
200
250
300
May
-93
Aug-
94
Aug-
95
Aug-
96
Aug-
97
Aug-
98
Aug-
99
Aug-
00
Aug-
01
Aug-
02
Jul-0
3
Nedcor25%
ABSA30%
SBSA20%
Investec4 %
SAHL3 %Other
2 %
First Rand Bank 16%
Total = R 307 bn Source: SARB DI900
Residential SA mortgage loans by lenders South African Mortgage Market Outstanding balance, R bns
The SA Mortgage Market
Source: SARB
Source: SAHLR millions per month
The rate of growth of the SA Home Loans book has been exponential
On a monthly basis SA Home Loans now originates up to R1billion in new mortgages
This represents approximately 15% of monthly originations
Source: Standard Bank
SAHL REGISTRATIONS
R0m
R200m
R400m
R600m
R800m
R1,000m
R1,200m
SAHL
BB
Total
Number of clients : 75 000Monthly increase in clients : 3 000Value of loans approved : R20billionSecuritised Portfolio :Thekwini Fund 1 - R1.25billion (December 2001)Thekwini Fund 2 - R1.1billion (December 2002)Thekwini Fund 3 - R2billion (December 2003)Thekwini Fund 4 - R2.5billion (July 2004)Thekwini Fund 5 - R3billion (February 2005)Single Seller Conduit programme - R15billion (launch July 2005)
SA Home LoansActivities since launch:
February 1999
Why No Securitisation prior to December 2001?
Big is bestRating agenciesExposure to international marketsLegal framework not securitisation friendlyLittle incentive for banks to securitiseNo ability to reinsure first loss position
S A Home Loans
The productIts positioningFunding
20 year, variable rate, reducing term mortgageNo prepayment or redemption penaltiesDiscounted legal and administrative switch feesNo ongoing administrative chargesRe-advance facility/access bondFixed margin above cost of moneySwitch re-finance proposition
The Product
Positioning
Control
Public
SpecialPurposeVehicleTrust
LoansTo thePublic
SeniorSecurities
SubordinatedSecurities
PurchaseSecurities
Independent Trustee
ExternalAuditor
Origination & ManagementFee : 0.5%
J IBAR Rate
Plus 2.1%
1.6% Yield pick up
SA Home Loans Securitisation Structure
InstitutionalInvestors
Public
Loans
J IBAR + 2.1%
Thekweni I
Special
Purpose
Vehicle
R1.25 Billion
A Class
92 %
AAA Rating
J IBAR + 70 Points
B Class
8 %
BBB Rating
J IBAR + 230 Points
C Class
2.5 %
Unrated
Pay away1.6% to investors
SAHL
0.5% Management Fee
Standard Bank
Deloitte & Touche
Standby Administrator
Investment Structure
Public
Public
Public
Public
Public
SPV
SPV
SPV
Senior MBS
Junior MBS
Senior MBS
Junior MBS
Senior MBS
Junior MBS
Short Term
Insurer
Life Insurer SAHL
Interim Funder
External Directors
AuditorsMARKET MAKER
INVESTORS
INVESTORS
SECURITIES AND AGREEMENTSTHE PUBLIC SA HOME LOANS SPECIAL
PURPOSE VEHICLES
MORTGAGE BACKED SECURITIES
INSTITUTIONAL INVESTORS
SAHL Legal Structure
Thekwini 4 Summary
Size of Issue : R2,500,000,000
Originator and Servicer : SA Home Loans (Pty) Ltd
Standby Servicer : Standard Bank of SA (Home Loan Division)
Arranger & Bookrunner : Standard Bank of SA (Corporate & Investment
Banking)
Substitution Period : 2.5 years
Final Legal Maturity : 21 Nov 2029
Call Date : 21 Nov 2009
Listing : BESA
Class A1
R 1,585 m
JIBAR + 0.39 %
Class B – R 115 m
JIBAR + 1.00 %
Additional Capital [0.5]%
Class A2 - R 643 m
JIBAR + 0.39 %
Class A3 – R 107 m
10.34% %
Class C – R 50 m
JIBAR + 2.10 %
Tranching
Capital [0.6]%
BBB
Rating
AAA
A
Not rated
WAL
5 yrs
5 yrs
4.18 to 5 yrs
In brief
Growth in SA Securitisation Market
0
2
4
6
8
10
12
14
16
18
Pre-2000
2000 2001 2002 2003 2004
R b
illi
on
2000 2001 2002 2003Kiwane (CDO) - R 450 m Thekwini 1 (RMBS) - R 1 350 m FRESCO (CLO) - R 900 m Cars 1 (Auto) - R 3 000 m
On the Cards (In-store) - R 2 000 m BMW 1 (Auto) - R 1 000 mPROCUL (Auto) - R 1 300 m BMW 2 (Auto) - R 1 000 mPrivate Mortgages (RMBS) - R 1 000 m Private Mortgages - R 1 000 mFintech Receivables (Equipment Lease) - R 700 m Thekwini 3 - R 2 000 mThekwini 2 (RMBS) - R 1 000 m InDWA (Conduit) - R 3 000Blue Titanium (Conduit) - R 500 m Grayson 1 (Conduit)ABCUS (Conduit) - R 250 m Blue Titanium (Conduit) - R 1 500 m
ABCUS (Conduit) - R 1 500 m
Public Issuance Deal List
• SA Home Loans launched the securitisation market in 2001
• Since then issuance volumes have grow to R 14 billion in 2003
Source: Standard Bank
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
T1 T2 T3 T4
Investor support to date…
Relative ValueRelative Value - Corporate and ABS Spreads
THE3A
THE3B
THE1BTHE2C
THE3C
0
50
100
150
200
250
2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
AAA AA A BBB
OMO1
DC02DC01
AUTO04
THE1APROA21
PROA11
NED2
IPB1
THE2A
bps
FRE1C AB02
THE2B
0
50
100
150
200
250
THE
1A
THE
1B
THE
2A
THE
2B
THE
2C
PR
V1A
PR
IV1B
OM
O1
AG
01
EG
L01
AU
TO3
AU
TO4
THE
3A1
THE
3A2
THE
3A3
THE
3B
THE
3C
CA
R1A
2
CA
R1B
CA
R1C
PR
IV2A
1
PR
IV2A
2
PR
IV2B
bps
AA
BBB
AA/A
AAA
2001-2002 RMBS 2003 RMBS and Selected Deals
• South Africa has seen dramatic growth the capital market since the 1st bond issue by Telkom in 1999
• Spreads on each subsequent transaction have improved
• SA Home Loans transactions are the benchmark in the securitisation market
Source: Standard Bank
Securitisation – Cost of Funds History
0.000%0.100%0.200%0.300%0.400%0.500%0.600%0.700%0.800%0.900%
Thekwini 1 Thekwini 2 Thekwini 3 Thekwini 4
Thekwini
Blended Cost of Funds
Securitisation - A Practical Guide Some Lessons Learned
Size does countQuality of dataSystem reporting abilityTime, money, personnelTiming – Market conditionsRatingsPricing“Build it they will come …….”