Situation

An established mortgage originator leveraging a related wealth management capability was operating under the traditional loan origination model with sound relationships with a number of major Australian banks. The revenue stream of up front and trailing commissions from traditional origination was acceptable, however the ongoing customer service proposition was compromised by the bank’s marketing activities limiting the long-term value of the business. The company needed a better mortgage model to secure and maximise sustainable long-term revenues to increase the value of the business.

Understanding the market dynamics of origination and securitisation, FCL was engaged to develop and implement a better business model. Increasing the value of the business was the core deliverable. The FCL approach was structured to analyse the business, the changing economic conditions, market developments, and determine the strength and quality of the mortgage business originated since inception in 1997.

Then satisfied with the market opportunity, FCL completed a detailed Information Memorandum (‘IM’) with a full operational and financial feasibility with supporting process mapping to develop a mortgage securitisation program for prime, fully insured, residentially backed mortgages. Program incorporated a clear separation of risk functions to mitigate credit risk and is supported by outsourced arrangements with a recognised loan servicer, mortgage insurer and collections group to mitigate service risk.

The IM was instrumental in obtaining the support of a major funder for a $250m warehouse facility, which flows through to a term securitisation program. Facility structuring and associated legal and facility documentation coordinated by FCL across multiple partners.

With FCL providing direction and project management expertise, company is proceeding to full implementation, which is forecast to more than double the underlying value of the business.