housing finance for turkey linking primary mortgage markets to capital markets - the perspective of...
TRANSCRIPT
Housing Finance for Turkey
Linking Primary Mortgage Markets to Capital Markets -
the Perspective of a Practitioner
Simon Stockley
09/10 November 2004
South African Mortgage Market Overview
• Sophisticated mature – R300billion• Dichotomous • Dominated by Big 4 Banks• Sound legal structure – title & foreclosure• Wide margins – no real competition• No non bank lending• Banks “cash rich” – no shortage of capital• Credit 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
SA Home LoansActivities since launch: February 1999
: R15billion
: R1.1billion (December 2002)
Number of clients : 50 000
Monthly increase in clients : 3 000
Value of loans approved
Securitised PortfolioThekwini Fund I : R1.25billion (December 2001)Thekwini Fund 2
Un-securitised : R6billion
Thekwini Fund 3 : R2billion (December 2003)Thekwini Fund 4 : R2.5billion (July 2004))
Single Seller Conduit Programme : R15billion – launch January 2005
Why No Securitisation Prior to December 2001?
• Big is best• Rating agencies• Exposure to international markets• Legal framework not securitisation
friendly• Little incentive for banks to securitise• No ability to reinsure first loss position
S A Home Loans
• The product• Its positioning• Funding
• 20 year, variable rate, reducing term mortgage• No prepayment or redemption penalties• Discounted legal and administrative switch fees• No ongoing administrative charges• Re-advance facility/access bond• Fixed margin above cost of money• Switch re-finance proposition
The Product
Positioning
Control
Public
SpecialPurposeVehicleTrust
LoansTo thePublic
SeniorSecurities
SubordinatedSecurities
PurchaseSecurities
IndependentTrustee
ExternalAuditor
Origination & ManagementFee : 0.5%
JIBAR Rate
Plus 2.1%
1.6% Yield pick up
Securitisation Structure
InstitutionalInvestors
Public
Loans
JIBAR + 2.1%
Thekweni I
Special
Purpose
Vehicle
R1.25 Billion
A Class
92 %
AAA Rating
JIBAR + 70 Points
B Class
8 %
BBB Rating
JIBAR + 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
VEHICLESMORTGAGE
BACKED SECURITIES
INSTITUTIONAL INVESTORS
SAHL Legal Structure
BBB
Thekwini 4 Summary
Class A1
R 1,585 m
JIBAR + 0.39 %
Class B – R 115 m
JIBAR + 1.00 %
Capital [0.6]%
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 %
Rating WAL
AAA
A
4.18 to 5 yrs
5 yrs
Tranching
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
In brief
Not rated 5 yrs
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
Public Issuance Volume
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
TH
E1A
TH
E1B
TH
E2A
TH
E2B
TH
E2C
PR
V1A
PR
IV1B
OM
O1
AG
01
EG
L01
AU
TO
3
AU
TO
4
TH
E3A
1
TH
E3A
2
TH
E3A
3
TH
E3B
TH
E3C
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
SecuritisationA Practical Guide – Some Lessons
Learned• Size does count• Quality of data• System reporting ability• Time, money, personnel• Timing – Market conditions• Ratings• Pricing• “Build it they will come …….”
