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Residential mortgage-backed securities application criteria

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:

  1. New issuance of internal RMBS.
  2. Upsize of existing internal RMBS.
  3. Where the total amount of sale of loans to, or repurchases from, the loan pool between monthly report dates exceeds 2.5% of the outstanding pool amount at the last monthly report date.
  4. Changes to the capital structure or the notes on issue.

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.


  • Background on the issuer (including all ratings).
  • Details of the issue, as provided in an issue notice, prospectus and/or information memorandum.
    A completed term sheet to initiate our assessment of new RMBS instruments. The term sheet contains required information on the security and transaction parties.


Confirm the issue meets the following criteria:

  1. Issues must have a long-term AAA rating from at least one acceptable rating agency. This must be a public rating.
  2. New Zealand-originated first mortgages on New Zealand residential properties.
  3. The securitised mortgages must be owned by a bankruptcy-remote special purpose vehicle (SPV).
  4. The securitised mortgages may have a maximum, indexed loan-to-value (LVR) ratio of 80%, or, where a LVR is or has become greater than 80%, the mortgage must be insured or be repurchased by the originator. The insurance provider providing lender's mortgage insurance must be an unrelated party with an insurer financial strength rating of at least A (Standard & Poor's or Fitch Ratings) or A2 (Moody's Investors Services) and the insurance must cover all losses realised in a default on the mortgage up to an amount of no less than 40% of the loan value.
  • The value of other secured loans must be included in the calculation and reporting of LVR. ‘Other secured loans’ means loans outside the pool (or, as the case may be, portions of those loans) that are: 

(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.

  • Where an originator has a covered bond programme, the same indexing methodology must be applied. Where the originator does not have a covered bond programme, contact our Risk Unit to agree on the methodology to be applied.
  1. Loans may be included in the pool only if the originator has, before loan approval and as part of the loan origination and approval process, documented, assessed and verified the ability of the borrower to meet their repayment obligations.
  2. Only loans that are performing may enter the pool (non-performing loans are those that are 90 days or more past due).
  3. RMBS must be lodged and settled in NZClear.

Reporting requirements

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:

  1. Cash flow reporting as prepared for the RMBS trustee.
  2. Swap reporting as prepared for the RMBS trustee.
  3. Financial reports of the issuing entity.
  4. Rating agency loan level data, which may be redacted to the extent that allows the submission to comply with New Zealand law.

The Box File Transfer Service (BoxFTS) is the Reserve Bank’s chosen method for exchanging documents and data securely. Documents relating to the RMBS regular reporting, transaction approvals, or new issuances applying for repo-eligibility should be submitted to the Reserve Bank through the Box. 

Read our BoxFTS user guides

Submit your information by email to [email protected] and

Contingency plan

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:

  • the back-up to the counterparty involved in the transaction
  • a brief description of how the transition to the back-up counterparty would occur
  • an estimated timeframe for the transition.

You must consider these five counterparties in your contingency plan at a minimum:

  1. Servicer of the mortgages
  2. Manager of the transaction
  3. Account bank
  4. Swap counterparty
  5. Paying/calculation agent.

Operational requirements

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

Resident withholding tax

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.

Right of refusal

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.

Authorised signatories

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.

Where to apply

Send email applications and monthly reports to FMDPortfolioMg[email protected] and [email protected]

Our decision on deferred payment mortgages in the context of RMBS asset pools

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:

  1. Until 31 March 2021, deferred payment mortgages can remain in the RMBS loan pool or be sold into the RMBS loan pool, subject to the following restriction:
    a) The proportion of deferred payment mortgages in the RMBS loan pool must not exceed the proportion of deferred payment mortgages in the residential mortgage book of the originator. We expect reasonable steps to be taken to ensure that the amount of deferred payment mortgages in the RMBS pool is not excessive.
  2. As part of monthly reporting on RMBS asset pools, from 30 June 2020 we will require reporting of:
    a) principal of deferred payment mortgages as a proportion of the total principal in the RMBS pool by:
  • total deferrals (all types) in each LVR bucket (percentage)
  • principal and interest deferrals per LVR bucket (percentage)
  • principal only deferrals in each LVR bucket (percentage)

b) principal of Deferred Payment Mortgages as a proportion of the total principal of the originator residential mortgage book by: 

  • total deferrals (all types) in each LVR bucket (percentage)
  • principal and interest deferrals per LVR bucket (percentage)
  • principal only deferrals in each LVR bucket (percentage).
  1. The reporting requirements in (a) and (b) are to be included as part of the monthly reporting. The LVR buckets for these reporting requirements are the same as those for regular monthly reporting.

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).