Media Release New Eligibility Criteria for Commercial Mortgage Backed Securities and Other Asset Backed Securities, and Measures to Strengthen Privacy

New eligibility criteria for commercial mortgage backed and asset backed securities

In October 2012 the Bank indicated that it would release draft reporting templates for commercial mortgage backed securities (CMBS) and other asset backed securities (ABS) to be eligible for repurchase agreement at the Reserve Bank. These templates are now being made available for consultation.

The new information requirements for CMBS and ABS reflect the Bank's desire for more comprehensive information about these securities. This information will assist the Bank in its assessment of the value of the underlying assets (and therefore the haircuts that will be applied) and enhance transparency and standardisation in the securitisation market.

The specific information required by the Bank is set out in the reporting templates on this website. In summary:

• the transaction-level and security-level templates for CMBS and ABS are comparable to those finalised for residential mortgage-backed securities (RMBS), reflecting the similarities in asset trust and deal structures;
• anonymised loan-level reporting is required for CMBS, together with a separate pool-level template;
• while loan-level reporting is not required for ABS, a separate pool-level template is proposed to capture the general characteristics of the financial contracts backing these securities; and
• the cash flow waterfall template for RMBS will apply to both CMBS and ABS.

Proposed requirements relating to data availability, the date of implementation, reporting frequency, who reports the information, grandfathering, liability disclaimers and privacy protections are the same as those for RMBS. For these details see The RBA's Response to Consultation on its Proposed RMBS Reporting Templates.

Proposals to strengthen borrower privacy

The Bank is also proposing some additional changes to the RMBS loan-level template that is to be made publicly available to permitted users, to further safeguard the privacy of borrowers whose loan information is reported in the template.

Existing borrower privacy safeguards established by the Bank require that information providers replace actual loan and borrower identification numbers with dummy identifiers and that users of the data be limited to those with a legitimate purpose, such as potential investors and researchers. These users also need to register with the information provider to access the data and enter into a binding agreement that limits the use of the data to an appropriate purpose.

In addition to these arrangements, the Bank is now proposing that the postcode information in the RMBS loan-level template be replaced by a broader Australian Bureau of Statistics statistically defined area. The areas are large enough to obscure the property location for borrower identification (there are more than 100 of these areas in total) while retaining the analytical usefulness of the data.

Some date fields in the loan-level template will also be reported in calendar quarters, rather than exact dates.

These amendments to the publicly reported loan-level template are designed to further reduce the possibility of these data being matched with data available elsewhere in order to identify borrowers. For further details please see Annex: Proposed amendments to the residential mortgage backed securities loan-level reporting template.

It is also proposed that a pool-level postcode summary of 12 key variables be made publicly available.

No changes have been made to the RMBS loan-level template that is to be reported to the Bank, besides the addition of a field with the Australian Bureau of Statistics' statistically defined area.

Consultation Period

The draft reporting templates and changes relating to privacy are now open for comment.
Comments should be made by 28 October 2013 and be directed to:

The Head of Domestic Markets Department
Reserve Bank of Australia
GPO Box 3947
SYDNEY NSW 2001
or by email to dmsubmissions@rba.gov.au.

Annex: Proposed amendments to the residential mortgage backed securities loan-level reporting template

The Bank is proposing the following:

1. Removal of the last three digits of the property postcode (field RL065) in the publicly reported template.
2. The addition of a new data field based on Australian Bureau of Statistics Statistical Areas (Level 4).
   
   The property's Australian Bureau of Statistics Statistical Area (Level 4) (SA4), as defined by the Bureau in the Australian Statistical Geography Standard (ASGS), is reported by mapping the property's postcode to its SA4 using the postcode-to-SA4 mapping tables provided by the Bureau. The current version of the mapping is provided in 1270.0.55.006 – Australian Statistical Geography Standard (ASGS): Correspondences, July 2011.
   
   The property's SA4 should be reported using the most up-to-date Australian Bureau of Statistics postcode-to-SA4 mapping (or an exact mapping by a third-party provider specialising in this service) in effect at the date that the mortgage secured by the property entered the collateral pool.
   
   For RMBS deals outstanding in July 2011, that is, before the ASGS became effective, the SA4 should be reported using the postcode-to-SA4 mapping in effect on July 2011.
   
   In cases where postcodes appear in more than one statistical area, the property should be assigned to the SA4 to which the highest percentage of the postcode is mapped.
3. Issuers (or their information providers) should report a pool-level postcode summary of 12 key fields: number of loans within postcode (RL062), current balance (RL012), loan purpose (RL023), seasoning (RL027), original LTV (RL030), current LTV (RL031), loan documentation (RL033), account status (RL049), days in arrears (RL054), employment type (RL076), primary income (RL090), and secondary income (RL092).
   
   Postcodes with three or fewer properties within a single RMBS collateral pool should not be reported individually, but should instead be aggregated in a ‘Redacted Postcode Category’.
   
   The template for the report is available at RMBS postcode pool-level reporting template.
4. In the publicly reported template, information providers should report nine loan-level variables using quarterly calendar time. In particular:
   
   Information providers should report the calendar quarter instead of the exact date in settlement date (RL022), maturity date (RL028), interest only expiry date (RL047), fixed rate expiry date (RL048), date of foreclosure (RL052), and property valuation date (RL068).
   
   Information providers should report the number of calendar quarters instead of the number of months in loan term (RL025), remaining term (RL026) and seasoning (RL027).

The changes to the loan-level template for RMBS are tabulated in the Amendments to RMBS loan-level reporting template.