Publication Date: Thursday, 21 October 2021
This article originally appeared in KangaNews

Adam Moore, director and head of funding and securitisation at Brighten in Sydney, discuses the lender’s debut capital-market deal, the funding model for its nonresident programme and expanding its presence in the Australian prime lending space.

Brighten issued its first securitisation deal in April this year – a nonresident residential mortgagebacked securities (RMBS) transaction, Solaris 2021-1. What is the significance of this deal for Brighten as a business?

The Solaris 2021-1 deal was significant because it validates the strength of our business and funding strategy as well as the overall infrastructure we have put in place. Since we launched, in 2017, we have gone from effectively funding the loans ourselves to forming senior warehouse relationships and now having completed our first public RMBS deal. As part of the process, we sought validation from investors, rating agencies, and our arrangers and joint lead managers. Having completed our inaugural deal, we are now well placed to continue our funding strategy and set up the business for further growth.

We remain committed to the non-resident sector and, during the execution process for the Solaris 2021-1 transaction, we made it very clear to investors that we want to continue to write nonresident loans and be a regular issuer in the public securitisation market. To this end, we hope to become an annual issuer. Our first public RMBS deal was significantly oversubscribed. We had assets available to upsize further but chose to keep these in the warehouse to make sure we will have an attractive book from a seasoning and size perspective when we come back to market next year.

After starting in the nonresident market, Brighten has launched a domestic-resident mortgage product. What is the strategy here?

We are taking a similar approach with our prime resident portfolio as we did in the nonresident space. We did a soft launch of our domestic product in January, building a diversified pilot portfolio we funded ourselves while we developed further warehouse relationships. Through a focused distribution strategy, we have managed to grow our resident home-loan book quite consistently over the last six months and have extended our offering to the wider market. We expect growth will ramp up significantly in the coming months as we expand our distribution platform.

What timing does Brighten have in mind for bringing the resident mortgage product to the public securitisation market?

As part of the roadshow and investor engagement we did for the Solaris 2021-1 deal, our message to investors was that our strategy is to expand into the domestic resident space and that this will be the more significant part of our mortgage portfolio moving forward. This was well received because it was clear that we will be setting up a separate programme for domestic residents but that we will also continue to support the nonresident space with regular issuance. Initial engagement has been positive, and I think investors are keen to see what the resident book looks like as it grows. We are conscious that we need to build up some track record in the resident part of the market first. We do not want to rush to market, but at the same time we want to be there as soon as it is feasible. The Australian mortgage market is hypercompetitive as the banks are offering very low-cost loans, especially in fixed-rate product.

How will Brighten compete and what does it believe its unique selling point to be?

The mortgage market in Australia is very competitive but at the same time the nonbank space is growing. This opens up opportunities for new entrants that already have a foot in the market, such as Brighten. We have built Brighten with a vision to be a significant player in the nonbank lending space and, with this goal in mind, developed a strong platform with a lot of experience and capability in the resident area already – operationally and in the credit and underwriting team. Our distribution strategy is focused on building key partnerships and targeting specific market segments.

We have established an expansive broker and aggregator network with access to more than 11,000 brokers Australia-wide. We have a full product offering that includes loans for prime borrowers, the self-employed, those who need alternative-documentation loans, temporary residents and expats, as well as construction loans. Our aim is to have a complete offering so when a broker looks at us it is likely we will have a product for any type of borrower.

The strength and diversity of our funding is one of the key points of difference for Brighten. We have well-established warehouse-funding arrangements, a public RMBS programme and a wholesale credit fund to provide further funding diversification. This is a huge advantage for our broker partners and customers, as our reliable and stable funding platform provides us flexibility in the types of loans we write.

About Brighten Home Loans

Brighten Home Loans is an Australian-owned and regulated nonbank lender with offices in Sydney, Melbourne, Brisbane, Hong Kong and Shanghai. Brighten was established and commenced lending in 2017. Brighten has an innovative product offering, including prime and near-prime, nonresident and construction loans, and has grown its AUM to more than A$800 million and its team to more than 70 finance professionals. Brighten is a full-service nonbank provider, responsible for the origination, underwriting, servicing and funding of its mortgage portfolio. With an end-to-end digital mortgage solution platform that drives innovation to achieve cost and service efficiencies, as well as an experienced leadership team, Brighten is well placed for growth.

The company also has a strong focus on corporate governance, corporate social responsibility and environmental sustainability, which are the key pillars of Brighten’s culture. Brighten is a “pay equity ambassador” of the Workplace Gender Equality Agency in recognition of the company’s commitment to closing the gender pay gap. In July 2021, Brighten became a member of the Responsible Investment Association Australasia and a Plant-a-Tree Program “partner for carbon neutral”, further to strengthen its commitment to ESG.

Business performance

Through its focus on profitable niches in the initial growth stage, Brighten has been able profitably and sustainably to grow its mortgage portfolio since inception. In the past 12 months, Brighten’s focus has been on building capabilities and expertise, increasing the size of its credit and operations teams, and further improving distribution networks nationally.

In parallel, Brighten has conducted significant investment in developing an end-to-end digital-mortgage solution through its innovative propriety platform that will deliver cost and service efficiencies for brokers and customers.

Following the successful launch of its resident mortgage programme focused on self-employed and SME borrowers, Brighten is generating strong financial performance with total originations increasing more than 400% on the previous year. From this strong financial position, Brighten is well placed sustainably to scale its business to be a significant player in the nonbank lending space.

Funding strategy

Brighten has established multiple warehouse-funding arrangements with global investment and domestic banks, with further funding diversification provided through a wholesale credit fund. In April, Brighten celebrated a big milestone as it priced its inaugural A$366.5 million RMBS transaction, backed by loans to nonresident borrowers, and Australian residents and citizens serviced by foreign income. The deal was significantly oversubscribed with demand spread across geographic regions. Brighten’s long-term focus is to be a regular issuer as it develops its capital-markets programme in the resident and nonresident sectors. The company takes a proactive approach to its funding arrangements through actively engaging potential funders to develop new funding lines, which will enable Brighten to scale its growth effectively and enter new product segments.