This page sets out application criteria for acceptance of residential mortgage-backed securities (RMBS) in our domestic operations.
To obtain or maintain repo-eligibility in our domestic market facilities, the following actions require our approval:
Failure to obtain our approval for 2, 3 or 4 will result in your repo-eligibility being revoked. Provide the information noted below and attest to the following statements.
Confirm the issue meets the following criteria:
(i) secured against the same property as one or more loans inside the pool (pool loans) and
(ii) rank equally or senior to pool loans (in terms of credit hierarchy) on the default of the borrower.
The requirement to use indexed LVR in all reporting took effect from 1 July 2020.
Issuers are required to submit a monthly report to us providing updated details on the pool (use the reporting template below).
From 1 April 2021, issuers must also submit the following as they become available:
Issuers must submit a bond factor at least three business days before the rate set date, as well as the date the bond factor is applicable to. They must also provide the all-in coupon rate for the payment period on the rate set date.
This information can be submitted via email to [email protected] and [email protected]
You need to submit a contingency plan that describes a back-up to parties to the RMBS trust should the current arrangement fail or contribute to the inability of the senior notes to retain an AAA rating.
This contingency plan can be submitted in the form of your choosing, but must describe at the minimum:
You must consider these five counterparties in your contingency plan at a minimum:
There is a 5% limit on the total of assets, other than mortgages, that can be held in the trust otherwise the notes may lose their eligibility status with us. If the total of ‘other assets' is held constantly around the 5% level with the originating bank, then we, at our discretion, may increase the haircut applied to this security by a margin of up to 5%.
We will also be particularly concerned if the level of cash held within the trust is above 5% and is deposited in the originator bank. Where cash holdings held with the originating bank accumulate in the current reporting period to exceed the 5% limit, we expect you to reinvest these cash holdings in full into new mortgage loans at the next sale date. This is conditional on the next sale date being no later than 30 days after the last report date.
We expect you will take steps to maintain the quality of the pool by replacing non-performing loans or loans that exceed an indexed loan-to-value ratio (LVR) of 80%. We would not expect the combined amount of non-performing loans or loans exceeding an indexed LVR of 80% to exceed 1% of the outstanding pool amount. If this occurs, we reserve the right to adjust the haircut applied or review your repo eligibility status. Refer to the attestation requirements above for a definition of indexed LVR.
We will value RMBS at par and will apply the fixed haircut to the par value of the securities delivered to us as collateral. We assume the coupon on RMBS will be broadly in line with the net yield on the underlying mortgage pool and reserve the right to adjust the haircut for securities that don't meet this criterion.
Read more about eligible securities and haircuts
As is usual for securities in NZClear, only NZClear members who have a valid resident withholding tax certificate are allowed to hold these securities in the NZClear depository.
We reserve the right to refuse an application for any reason and do not have to disclose our reasons. In particular, if the credit rating of the issuer/issue falls below our threshold, then the issue will no longer be eligible in our market operations.
The information above must be signed by authorised signatories of the issuer or originator. We require a list of authorised signatories for the issuer or originator and receive satisfactory evidence, both in form and substance, that the issuer's or originator's authorised signatories have the authority to execute notices or communications issued in connection with any documentation required to give effect to the issuer's or originator's programme.
Regular monthly reporting is exempt from the requirement to be signed by an authorised signatory.
Send email applications and monthly reports to [email protected] and [email protected]
17 August 2020
The government and retail banks have made deferred mortgage payments available in response to the COVID-19 pandemic. This deferral includes principal and interest payments. To support this, we have decided loans impacted by the temporary deferral (deferred payment mortgages) can be included in internal RMBS loan pools until 31 March 2021. Consistent with our advice, deferred payment mortgages should not be reported as being in arrears.
The following requirements have been added until further notice:
b) principal of Deferred Payment Mortgages as a proportion of the total principal of the originator residential mortgage book by:
The reporting template (updated 7 May 2020) provides reporting fields for these metrics in rows 84 to 98.
Haircuts, valuation method and existing eligibility criteria for RMBS are unchanged. Issuers are reminded that there is a limit of 1% of the RMBS asset pool that can be either high LVR (>80%) or non-performing (>90 days in arrears).