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Housing Finance Summit Amelia Island, Florida

Housing Finance Summit Amelia Island, Florida Annual discussion of Housing Market : Investing, Origination and Public Policy 04 – 06 April 2005. South African Mortgage Market Overview. Sophisticated mature – R300billion Dichotomous Dominated by Big 4 Banks

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Housing Finance Summit Amelia Island, Florida

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  1. Housing Finance Summit Amelia Island, Florida Annual discussion of Housing Market : Investing, Origination and Public Policy 04 – 06 April 2005

  2. South African Mortgage Market Overview • Sophisticated mature – R300billion • Dichotomous • Dominated by Big 4 Banks • Sound legal structure – title & foreclosure • Wide margins – no real competition • No non bank lending • Banks “cash rich” – no shortage of capital • Credit data good

  3. The SA Mortgage Market Source: SARB South African Mortgage Market Residential SA mortgage loans by lenders Outstanding balance, R bns Total = R 307 bn Source: SARB DI900 Source: SAHL R millions per month • The rate of growth of the SA Home Loans book has been exponential • On a monthly basis SA Home Loans now originates up to R1billion in new mortgages • This represents approximately 15% of monthly originations Source: Standard Bank

  4. SA Home LoansActivities since launch: February 1999 • Number of clients : 75 000 • Monthly increase in clients : 3 000 • Value of loans approved : R20billion Securitised Portfolio : • Thekwini Fund 1 - R1.25billion (December 2001) • Thekwini Fund 2 - R1.1billion (December 2002) • Thekwini Fund 3 - R2billion (December 2003) • Thekwini Fund 4 - R2.5billion (July 2004) • Thekwini Fund 5 - R3billion (February 2005) • Single Seller Conduit programme - R15billion (launch July 2005)

  5. Why No Securitisation prior to December 2001? • Big is best • Rating agencies • Exposure to international markets • Legal framework not securitisation friendly • Little incentive for banks to securitise • No ability to reinsure first loss position

  6. S A Home Loans • The product • Its positioning • Funding

  7. The Product • 20 year, variable rate, reducing term mortgage • No prepayment or redemption penalties • Discounted legal and administrative switch fees • No ongoing administrative charges • Re-advance facility/access bond • Fixed margin above cost of money • Switch re-finance proposition

  8. Positioning

  9. Thekwini 4 Summary Tranching Rating WAL In brief Size of Issue : R2,500,000,000 Originator and Servicer : SA Home Loans (Pty) Ltd Standby Servicer : Standard Bank of SA (Home Loan Division) Arranger & Bookrunner : Standard Bank of SA (Corporate & Investment Banking) Substitution Period : 2.5 years Final Legal Maturity : 21 Nov 2029 Call Date : 21 Nov 2009 Listing : BESA Class A1 R 1,585 m JIBAR + 0.39 % 4.18 to 5 yrs AAA Class A2 - R 643 m JIBAR + 0.39 % Class A3 – R 107 m 10.34% % 5 yrs Class B – R 115 m JIBAR + 1.00 % A Class C – R 50 m JIBAR + 2.10 % BBB Capital [0.6]% Not rated 5 yrs Additional Capital [0.5]%

  10. Growth in SA Securitisation Market Public Issuance Deal List • SA Home Loans launched the securitisation market in 2001 • Since then issuance volumes have grow to R 14 billion in 2003 Source: Standard Bank

  11. Investor support to date…

  12. Relative Value • South Africa has seen dramatic growth the capital market since the 1st bond issue by Telkom in 1999 • Spreads on each subsequent transaction have improved • SA Home Loans transactions are the benchmark in the securitisation market Source: Standard Bank

  13. Securitisation – Cost of Funds History

  14. Securitisation - A Practical Guide Some Lessons Learned • Size does count • Quality of data • System reporting ability • Time, money, personnel • Timing – Market conditions • Ratings • Pricing • “Build it they will come …….”

  15. Thank You Simon Stockley • +27 83 2760068 • e-mail : simonst@iafrica.com

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