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Residential Mortgage Securitisation in Australia
Abstract : In a residential mortgage-backed security (RMBS) program, a bank or other financial institution sells its rights in a pool of home loans to a special purpose vehicle (SPV), which pays for the asset pool by issuing fixed or floating rate bonds in the financial markets to institutional investors. The SPV finances the interest and principal payments under these bonds from the pooled home loan repayments. The SPV is a 'special purpose' vehicle in the sense that it is established especially, and solely, for the purpose of acquiring the asset pool and issuing bonds against it. In practice in Australia, the SPV itself is invariably structured as a trust, which holds the asset pool on beh...
Assessment of Law Relating to the Transfer of Mortgagee's Rights to the Trustee Issuer in Mortgage Securitisation
Securitisation has been one of the most significant financial innovations in the capital markets over the last twenty years. It is the process of converting illiquid but income-producing assets and receivables that are not necessarily marketable, into securities that can be more readily placed and traded in the capital markets. One example of the securitisation process, namely “residential mortgage securitisation,” provides the focus for this article.
Issuance of Residential Mortgage-Backed Securities in Australia - Legal and Regulatory Aspects
In Australia, the term “residential mortgage-backed securities” (RMBSs) denotes debt securities, which are secured, in respect of principal and interest on a pool of residential mortgages. A public trustee company specially established solely for this purpose, which is known as a “special purpose vehicle” (SPV), issues the RMBSs. The issue of debt securities by trustee companies is unique to the Australian RMBS programs.In a typical residential mortgage securitisation program, a housing loan provider, generally referred to as the originating bank or the mortgage originator, “pools” selected housing loans and - for a price - transfers its rights under the loan agreements to the tr...
An Analysis of the Concept of Mortgage-Backed Securities
The purpose of this article is to examine the concept of mortgage-backed securities (MBS) issued in the securitisation programs in a theoretical context. First, it outlines a general explanation of the securitisation process, focusing particularly on MBS programs, within a context of microeconomic theory. Second, the incentives for participants in the MBS programs are outlined within a contractarian framework, which includes the agency theory, and provides a framework to analyse the incentives of the various participants at each stage of, or contract in, the overall securitisation process. Finally, suggestions are made concerning some of the key features that might characterise a theoretically optimal regulatory regime for mortgage-backed securities.
Assessment of Law and Practice Relating to the Mortgage Origination Process in Securitisation Programs
Securitisation is the process by which a credit institution - either a bank or an independent mortgage provider (IMP) - sells assets on its loan book - specifically, accounts receivable on its loan book - to another financial intermediary, which then funds its holdings by issuing asset-backed securities to investors. By this process, the original illiquid asset (e.g. a residential mortgage loan, credit card receivable, or motor vehicle lease) is transformed into a tradeable, more liquid debt security.
Assessment of Insolvency Issues for the Mortgage Originator and Trustee-Issuer in Securitisation Programs
There are two purposes of this article. Firstly, it examines the consequences for stakeholders, if the mortgage originator or subsequent assignee of its rights, e.g. the trustee issuer, become insolvent and considers the main legal and financial risk issues that can arise in an RMBS program in Australia. Secondly, it focuses on a qualitative assessment of the extent to which the current regulatory provisions governing the insolvency of the originator and trustee issuer either impede or facilitate the operation and growth of the RMBS market in Australia. The existing regulation for insolvency of the originator and issuer and their financial security are assessed using a “public benefit test” framework. This framework is based on the principles of social cost-benefit analysis and is used to identify an optimal RMBS legal and regulatory regime that would provide a resolution to the conflicting interests of participants in the RMBS process.
Impact of the Regulatory Regime on Promoting the Housing Finance Market in Australia
The purpose of this article is to analyse how Australia's regulatory framework for housing finance mitigates various risks in mortgage lending and promotes positive market outcomes and system stability. The article first considers the main bodies involved in the regulation of residential mortgages, their roles and the type of regulations enforced by each regulator in relation to housing finance in Australia. The key regulators identified in this article include the Reserve Bank of Australia, the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission. This part focuses on the post-financial crisis...
Financial Statement and Auditing Errors Associated with the Lawsuits Against Public Accountants in Australia and Singapore
This paper considers the legal liability regime for financial advisors, namely certified public accountants and auditors, in Singapore and Australia. Examination of the comparative aspects in which lawsuits against financial advisors are commenced provided an analysis of the legal and commercial environment and the regulatory regimes of the two jurisdictions considered. Information was collected from a wide range of sources including articles, texts, government reports and professional body publications. The main basis of the paper however, was a detailed analysis of a number of court cases in Singapore and Australia. A qualitative, legal case-study method was used to meet the following obje...
International Asset Securitization & Other Financing Tools
Asset securitization across borders offers not only increased opportunities, but also increased risk for those structuring financing packages. Lawyers and accountants examine the basis for using asset securitization, basic elements and "players" in the asset securitization process, implementation of such new assets as intellectual property rights bonds, Bowie bonds, Rod Stewart bonds, and James Bond bonds, and the impact of European monetary union. Published under the Transnational Publishers imprint.
