Steven Fleming

Steven
Fleming

Partner and Chief Executive Officer
Gryphon Capital Investments

Steven has more than 24 years’ experience across a broad range of areas, including debt capital markets, securitisation, funds management and structured finance.

Expertise

Diversify your income stream

Steven Fleming

Investors hunting for yield from listed companies today face unreliable yields, and falling capital values as rates creep higher, as well as new additional risks posed by government policies. However, investors can diversify their income and access comparable yields from other parts of the market not exposed to such headwinds. Show More

Protecting investors through ‘skin in the game’

Steven Fleming

Despite the complex name, securitization is a simple concept. Securitization is taking an illiquid pool of assets and converting them to liquid securities. Securitization got a bad rap in the wake of the GFC, but in Australia, there are important differences to the “sub-prime” market in the USA. This video... Show More

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Thank you for the question Mr T. As discussed, ‘skin in the game’ is the excess spread or profit margin. The excess spread is received monthly and is basically the difference between the interest earned on the mortgage pool less the interest paid on the bonds (RMBS) and the costs of servicing etc. The excess spread on a Prime RMBS transaction is typically between 0.55% and 1.00% of the total mortgage pool. The excess spread is only earned on the basis that there are No losses on the underlying bonds (RMBS). Hence, before any losses accrue against the bond (RMBS), the excess interest takes the first hit. However, prior to the excess spread being impacted, borrowers equity needs to be completely impaired (sale of the property minus the loan) and any lenders mortgage insurance applied. In Australia, all losses on borrowers default across Prime and Non Conforming RMBS transactions have been covered by Lenders Mortgage Insurance claims paid and excess spread. You also have a question with respect to the “typical triggers” for the Issuers to take a hit.? After the borrowers deposit and LMI, if any, any losses after a borrower defaults on their homeloan will be borne by the bank through a reduction in their excess spread. There is no “hit” for a increase in arrears except this may result in the senior AAA RMBS bonds receiving more of the principal repayments resulting in a higher cost of RMBS funding and reduction to excess spread. Thank you again Mr T and I hope that answers your question.

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