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Securitisation market ‘healthy’ but data ‘key’ – Pike

by: Richard Pike, chief sales and marketing officer, Phoebus Software
  • 06/06/2024
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Securitisation market ‘healthy’ but data ‘key’ – Pike
As the Global ABS conference, which focuses on securitisation, comes to its end, it’s time to reflect on the messaging, which has been fairly consistent over the three days.

Overall, the message seems to be that the securitisation market will remain very healthy, and a critical form of funding to the mortgage lending industry.

This, of course, is globally and not just in the UK. And we should also bear in mind that global economic factors can and will affect our market, as economies are inextricably interlinked.

There are plenty of mortgage originators looking to sell and plenty of investors looking to buy. This can only mean that liquidity will remain strong in a market that is still trying to get fully back to normal for many lenders.

Building societies are very much looking forward to utilising more wholesale funding following the easing of their capital constraints announced in recent weeks. This is great news for the sector and way overdue in levelling up the marketplace.


Data key to securitisation success

A lot of focus is on data, and in particular on how data available from loan servicing systems can affect the success of securitisation. It is clear that servicing platforms, like Phoebus, that hold every bit of data since the inception of a mortgage make life easier for clients looking to securitise.

Data is used by so many component parts of the securitisation process; from proving portfolio performance to investors, through to making ratings agencies’ jobs easier when it comes to grading the risk of the tranche of loans or mortgages to be sold.

Grading a tranche simply means assigning it a rating that assesses risk and quality. So, if something is seen as ‘AAA-rated’, this, on paper, is a better risk than something graded ‘B’, for example. This grading affects the price offered – an ‘AAA’ would achieve a higher price than a ‘B’ tranche.

There seems to be a more urgent requirement for real-time data to be made available. This allows real-time portfolio analysis at macroeconomic levels. This enables potential investors to model scenarios and “score” portfolios that have either been purchased or that are being offered as a mortgage-backed security to the market.

I spent a reasonable amount of time with the Mortgage Industry Advisory Corporation (MIAC), which was at the conference, and it has really cutting-edge tech in this space.

Overall, this conference is a must for anyone active in the securitisation market – a market that is evolving and increasing in size.

The winners will undoubtedly be those who work with partners who have a track record in delivering securitisations and that can bring both tech and expertise together under one roof to make the process as seamless as is possible.


To see Pike’s previous piece at the start of the Global ABS Conference, follow this link

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