Abstract
This final chapter of the monograph comprises the summary and main conclusions. As part of the discussion, main findings pertaining to current regulation are summarised in this chapter while emphasising findings related to the growth of residential mortgage-backed securities (RMBSs) and macroeconomic implications on the market. The next section presents a coherent summary of the proposed new regulatory framework. Finally, recommendations identified in previous chapters are presented in the abstract form, while suggesting areas for further research in future are presented at the end of the discussion.
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- 1.
In a broad sense, this even applies to the borrowers, who anticipate that ultimately the value of the property they have borrowed to purchase increases sufficiently to more than compensate them for their investment outlay and net borrowing costs.
- 2.
As noted earlier, this would not necessarily relieve the bank or IMP of any liability in tort. However, for the reasons outlined earlier, a detailed discussion of the bank’s or IMP’s liability in tort is beyond the scope of the book.
- 3.
From a social perspective, an interesting research question would be how the courts or the legislature will (or should) allocate these risks or, rather, the liability that flows from them. It is possible that the industry needs to be re-regulated, at some future stage of its development, in order to achieve economically efficient and “just” outcomes across all stakeholders and the community.
- 4.
A. Finch, ‘Securitisation’ (1995) Journal of Banking and Finance Law and Practice 247, 258.
- 5.
See, for example, see R. Bruce, B. McKern, I. Pollard and M. Skully, Handbook of Australian Corporate Finance (5th edition, Sydney: Butterworths, 1997) 257.
- 6.
See Standard and Poor’s, Structured Finance in Australia and New Zealand (Melbourne, 1999) 5.
- 7.
And licensing requirements, where relevant: see Regulations 7.6.01(1)(r) of the Corporations Regulations.
- 8.
See, for example, Carlill v Carbolic Smokeball Co [1893] 1 QB 256; and Lambert v Lewis [1982] AC 225.
- 9.
There may even be scope for increased government involvement in the industry. For example, in the United States, the mortgage-backed securities markets consist primarily of securities issued or guaranteed by two government-sponsored agencies, Fannie Mae and Freddie Mac, and one US-owned corporation, Ginnie Mae. Mortgage-backed securities are also issued by private institutional issuers. The government-sponsored entities and Ginnie Mae guarantee timely payments on their respective bonds. Any proposal for increased government involvement in the industry in Australia would need to be scrutinised carefully, however, particularly in the light of the Home Fund scandal discussed earlier.
- 10.
See further discussion in Sect. 8.4.3 of Chap. 8.
- 11.
See, for example, Clenae Pty Ltd and Ors v ANZ Banking Group Ltd [1999] VSCA 35 (9 April 1999); David Securities Ltd and Ors v Commonwealth Bank and Ors, (unreported, Full Federal Court, 10 May 1990) per Lockhart, Beaumont and Gummow JJ; the same case at first instance in the Federal Court of Australia per Hill J, 11 May 1989; Chiarabaglio v Westpac Banking Corporation (1989) ATPR 40–971; and Leitch and Ors v Natwest Australia Bank Ltd and Anor, (unreported, 12 October 1995, Federal Court of Australia) per Cooper J.
- 12.
See, for example, Locker and Woolf Ltd v Western Australian Insurance Co Ltd [1936] 1 KB 408; and Jester-Barnes v Licenses and General Insurance Co Ltd (1939) 49 Ll L Rep 231.
- 13.
In the United States, RMBS issues are regulated separately from the managed funds industry. Consideration could be given in Australia to establishing a separate division of the Corporations Act to regulate any future offering of RMBS issues to the public (as distinct from institutional investors).
- 14.
The point is not that banks and IMPs should be precluded from involvement in RMBS programmes. The point is that there is an appreciable risk to borrowers if they do, and borrowers (not banks or IMPs) should be the ones who decide whether borrowers are prepared to bear that risk. At present, it would appear that most borrowers in practice are not even aware that the risk exists.
- 15.
If the banks have lower costs because of securitising, they can (assuming a highly competitive environment) have lower interest rates and charges. The premium is built into the bank’s pricing via the competitive process in the market.
- 16.
A recent study undertaken by the US Securities and Exchange Commission has identified several items for enhanced disclosure in the mortgage-backed securities market. These include the purpose of the loan (e.g. whether it is a purchase or refinance); the original loan-to-value (LTV) ratio; any standardised credit scores of borrowers; the details of servicers for the pool (this need not always be the originator); the occupancy status of the security property (e.g. owner-occupied or rented); the property type (e.g. stand-alone house, detached dwelling, or apartment). For more detail, see Securities and Exchange Commission (US), Staff Report of the Task Force on Mortgage-Backed Securities Disclosure, January 2003, http://www.sec.gov.
- 17.
That is, in terms of Part IIIA of the Privacy Act 1988 (Cth)—in particular, sections 18 L(4), (4A) and (6), and 18 N(1)(b), (1)(bg)(i) and (1)(bh), and 18 N(1A), (1B) and (5).
Bibliography
Books and Book Chapters
Bruce, R., McKern, B., Pollard, I. and Skully, M., Handbook of Australian Corporate Finance, 5th edition, Sydney: Butterworths, 1997.
Journal Articles
Finch, A., ‘Securitisation’ (1995) 6 (4) Journal of Banking and Finance Law and Practice 247.
Senarath, S., ‘Securitisation and the global financial crisis: can risk retention prevent another crisis?’ (2017) 18 International Journal of Business and Globalisation 153.
Working Papers, Magazines, Newspapers and Reports
Securities and Exchange Commission (U.S.), Staff Report of the Task Force on Mortgage-Backed Securities Disclosure, January 2003, http://www.sec.gov
Senarath, S. ‘The Dodd-Frank Act doesn’t solve the principal-agent problem in asset securitisation’ (2017) blogs.lse.ac.uk (11 November 2018).
Standard and Poor’s, ‘Credit Ratings on Mortgage-Backed Securities’, Structured Finance Australia and New Zealand, Melbourne, 1998.
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Rajapakse, P., Senarath, S. (2019). Summary of Conclusions. In: Commercial Law Aspects of Residential Mortgage Securitisation in Australia. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-00605-1_9
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