Investing in RMBS of same lender?

Not sure if anyone doing this but give it a shot here anyway.

Anyone out there investing in RMBS by the same home/investment loan lender from which one
borrows and using the equity/cashout to do that?

Any concern with this way of investing? Is it a good debt recycling?

 

RMBS are a specific product usually purchased by large super funds and similar investors. Its not a product for small investors but some have marketed the product which is a concern but may be limited to sophisticated investors and often have a $500K minimum (or multi million dollars) . It is far more complex than appears. Margins are typically 1.3- 1.6% above market bill rates (0.90%) so overall returns are low but higher risks will produce higher returns so its low rate overall. The value lies in the term which can vary. Usually when the LVR of that pool drops to 80% the issuer buys the bonds back which generates further gains as income. In some ways there a inverse to a fixed rate loan which has a break costs. In rising rate markets a bond may even lose it capital value v its cost. Most RMBS start witha 30 year term so its a bond. I wouldnt touch long term bonds as the capital risks magnify. RMBS also repay income that comprises interest and a return of capital so you can end up spending or reinvesting (and losing) original capital.

Have you heard of US junk bonds ? Low level tranches (Cat 3) are junky and may be high LVR high risk loans. And there is no LMI. That is held by the issuer. RMBS offload the net book so it is off balance sheet at least for a period of time. Once its under 80% they buy back to bring better quality on board. So they offload risk. Thats the junky bit.
Michael Lewis wrote a terrific book on how he rigged these securities called "Liars Poker". Read it and you wont think again about asking. It shows how a market price can be rigged with knowledge.

RBA has some commentary that is recent : https://www.rba.gov.au/publications...lding-self-securitisations-as-collateral.html

You will likely produce negative returns if you use borrowed money - unless you buy high risk.