Thekwini

Historically, the majority of home loan finance in South Africa has been provided by the banks. They secure funding from the wholesale money and capital markets and lend these funds to the consumer against a security of a first mortgage bond. For this service they charge a margin of between 3 - 5%.

For the first time in South Africa, and launched by SA Home Loans ("SAHL"), an alternative method of funding has been designed to by-pass traditional intermediaries (the banks), and link borrowers directly to the money markets. This non-banking concept is that of securitisation.

Properties are still registered in the client's name and are therefore legally owned by the client. Loans in respect of the above are housed in a Special Purpose Vehicle ("SPV") called a Thekwini, which is insolvency remote.

In essence, SA Home Loans simply manages and arranges the securitisation process and "repackages" individual home loans into a sizeable pool that would attract institutional investors and fund managers who seek a reliable long term investment. It provides them an opportunity to diversify their bond portfolios away from the traditional investments such as government and corporate bonds and to purchase the rights to the income streams from the pool of underlying mortgages in a Thekwini.

They are protected from loss by credit enhancement features provided by the originator and servicer to the portfolio, SAHL. The structuring and rating of the Thekwini transaction is in line with international best practice.

These improved capital efficiencies and structural enhancements in the transaction will help maintain our competitive advantage in the residential mortgage market and will hopefully assist in ultimately greater savings to commercial borrowers.