A lender in Australia who offers reverse mortgages to local area seniors has completed a reverse mortgage-backed securitization, saying that it is the first of its kind in the market. This is according to original reporting at news outlets Banking Day and NZ Herald, which provides finance industry and general news, respectively, to Australia and New Zealand.
The issue raised A$142 million (approximately $104 million USD), giving the lender funding with a 30-year financial maturity, and the company CEO added that it would also increase its access of Australian reverse mortgage loan funding to A$1 billion (approximately $733 million USD).
“The transaction achieves another milestone in executing Heartland’s strategy to diversify type, source and tenor of its Australian funding and importantly evidences market liquidity to existing warehouse funders,” said Jeff Greenslade, CEO of Heartland Group in a statement provided to NZ Herald.
The funding was sourced primarily by offshore institutional investors, including from a UK-based investment manager. Greenslade adds that the financing structure gives it reliable access to long-dated funding by aligning with solvency requirements from European insurers. Access to that kind of funding has been largely unavailable to most Australian non-bank financial institutions, according to Greenslade.
It’s this funding which has also made Heartland’s reverse mortgage business a leader in the local reverse mortgage industry with 26% market share, and which has allowed the company’s reverse mortgage asset portfolio to achieve 98% leverage, he adds.
“Australian retirees are estimated to own around A$1.5 trillion in home equity – by far their largest pool of wealth in retirement,” Greenslade says. “Accessing a global base of offshore investors will assist Heartland to continue to enable thousands of Australian retirees to unlock this wealth while continuing to live in their own home.”
Australia’s reverse mortgage marketplace has gone through a period of transition over the past two years. In 2019, the local industry saw the exit of many formerly prominent banks active in the space, even as demand for the loans had been seeing an increase.
Other lenders exited the Australian reverse mortgage space due to outside pressure from the Australian Securities and Investments Commission (ASIC), including the then-largest lender in the region, Commonwealth Bank, in 2018.
Those exits sparked speculation that the Australian government may enter the reverse mortgage market, and the government rolled out a reverse mortgage-style program called the “Pension Loans Scheme” (PLS) which went into effect in July, 2019, and is available to Australians old enough to qualify for the nation’s age pension. The minimum age required for that pension is 66.