by Jenny Ruth
The program, which will be used to finance "non-conforming'' home loans and sub-prime motor vehicle loans, has been rated "Aa-1'' by Standard & Poor's, has an equivalent Moody's rating, and is the first to be backed by such loans.
Macquarie Bank is the program's lead manager.
Non-conforming loans are those who don't satisfy the criteria of traditional lenders and often have a higher risk profile. They include self-employed people with irregular employment, people with a credit default or small debts, older borrowers or recent migrants.
Liberty has previously completed three term residential mortgage-back securitisations. It is still the only originator of non-conforming and subprime mortgages with rated securitisation programs in Australia.
Liberty managing director Sherman Ma says his company has been working on entering the New Zealand market since December, running a pilot program here through "a few selected mortgage broker'' and setting up the appropriate structures, appointing valuers and working with solicitors drawing up loan contracts.
Ma won't reveal which mortgage brokers are involved, but says his company is strictly a wholesaler. "We're good at the product manufacturing side. When it comes to face to face with customers, other folks have a lot more experience. We're very aware of our strengths and weaknesses.''
He says his company sees a particular opportunity in New Zealand in the non-confirming area. "In the past, they've had nowhere to go other than the consumer finance companies which we find tend to be quite aggressive with the interest rates they charge,'' Ma says.
Private funding is still largely used to finance such loans in New Zealand and generally demands higher interest rates than can be gained by accessing wholesale capital markets, he says. "Interest rate differentials are quite large, much larger than in Australia.''
No specific part of the $A1 billion has been earmarked for New Zealand. How much is spent here depends entirely on the amount of business gained, Ma says.
While some have put the number of non-conforming borrowers at one in four loan applicants, Ma doesn't think its that high. The number also fluctuates over the economic cycle, declining in boom times and rising during recessions, he says.
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