SA Home Loans, a company based in KwaZulu/Natal, is the first to offer home loans through a funding mechanism called securitisation.
Securitisation is a process which enables you, the borrower, to tap directly into funds from big financial institutions which would not normally lend to individuals. Your home loan is pooled with many others in a financial instrument called a mortgage backed security, which is sold to big institutions, merchant banks and pension funds wishing to diversify their investments.
This means you can bypass the banks and link directly into the money and capital markets.The role of SA Home Loans is to "package" your home loan with the others and sell it to big investors. You continue to pay interest on your loan which S A Home Loans passes on to the owner of the security.
The security offers the big institutions both an income stream (from your interest payments) and a potential capital gain if they sell the security to another investor.
Your only obligation is to pay your monthly instalments when they fall due.
Simon Stockley, chief executive of SA Home Loans, says the price the big institutions will pay for the securities depends on the risk they are prepared to take. The packages carry various degrees of risk and are priced accordingly.
The securities will be held in a special trust vehicle which will be managed by a firm of chartered accountants.
The trust's books will be audited by independent auditors.
As further protection, an independent protector will be appointed by the trust to keep an eye on the way the money is managed.
The company will make its first issue of securities when it has lent out R300 million to home buyers. The loans will be packaged in lots of R25 million each or more depending on the demand from institutions wanting to invest in the securities.
In the United States, half of all home loans are securitised as is one fifth of all motor car finance and credit card debt.