As the US government begins to scale back its mortgage-backed securities (MBS) purchase program
, the Australian government on Sunday announced plans to extend a residential MBS (RMBS) investment program.
The Australian Office of Financial Management
(AOFM) will invest up to another AU$8bn (US$7.25bn) in triple-A-rated RMBS in an effort to support competition in Australia's mortgage market.
"The Government's temporary extension of the program will help smaller lenders to continue to issue RMBS in the short term as the securitization market recovers from the impacts of the global financial crisis," said Wayne Swan, Treasurer of the Commonwealth of Australia, in a statement.
So far, the investment program is nearing completion of an AU$8bn RMBS investment initiative announced in late September and in October of 2008. The initiative helped five non-major Australian banks, along with building societies, credit unions and lenders to raise more than AU$10.4bn of funding.
"This supported competition in the mortgage sector at a time when the private securitization market had collapsed and the global financial crisis brought banking systems around the world to their knees," Swan said. "Specifically, the Government's investments in RMBS has enabled smaller lenders to lend at competitive rates of interest and maintain a higher level of lending and market share than would otherwise have been possible. It has also helped to maintain the operation of the RMBS market and preserve its infrastructure, which will help its recovery as investor sentiment turns."
Write to Diana Golobay