Van Hessen joined NIB Capital in 1999 and took over responsibility for the securitzsation and mortgage finance activities in 2000. Since joining NIB Capital, based in The Hague, van Hessen has reorganized the residential mortgage principal finance business as well as headed up the firm's Dutch RMBS program. He has been involved in securitization in the Netherlands since the market's inception and in 1997 launched an innovative consumer loan securitization program at Bank Labouchere.
How do you choose mortgage portfolios to buy and securitize? Any plans to buy portfolios outside the Netherlands?
NIBC purchases portfolios to help our counterparties achieve the risk or funding aims they have. We have done this before in the Netherlands and certainly expect to do the same outside the Netherlands--for example, in the U.K., which has a relatively active market, but not as active as the U.S.
Will buying and securitizing mortgage portfolios still be profitable after Basel II?
Basel II is still some distance away, but NIBC is of the opinion that the dual purpose of securitization, risk transfer and funding will remain interesting for almost all originators. It's clear that we're not going the covered bond route for the time being. Economically, we think it still makes more sense to use securitization. We prefer securitization because it combines risk transfer and funding.
Are you considering or have you already sold equity pieces in your RMBS deals? What are the benefits of selling this kind of risk?
Many of our Dutch MBS transactions have a rated tranche--double-B for instance--as the lowest tranche. So, equity in the true sense is not available. In transactions where it has been available, we regard the sale of equity as a purely rational economic decision, depending on the pricing that can be achieved for this type of risk.
NIB recently completed the first KfW-sponsored synthetic RMBS deal in the Netherlands. What was the thinking behind doing such a transaction? What were the benefits?
Over the past six years, NIBC has issued 11 cash transactions under its Dutch MBS program and will continue to use this platform as its main program for Dutch mortgage securitizations. We think, however, that doing the Provide Orange transaction was beneficial in a number of ways. Firstly, of course, the diversification of the investor base by involving a super-senior swap counterparty instead of a large number of triple-A investors. Also, some of the loans in the Provide Orange portfolio were more cumbersome to transfer in a normal way due to differences in documentation. And, a unique feature of the KfW platform is that these two benefits can be achieved at a zero risk weighting.
What else is NIB Capital doing to expand its investor base for RMBS?
We have included a dollar tranche in our latest Dutch MBS XI transaction to tap this investor appetite. For future transactions, NIBC will also consider looking into a Dutch MBS transaction targeted toward U.S. investors, probably a Rule 144a deal.
Is NIB Capital considering securitizing any other assets aside from mortgages?
NIB Capital Bank has already securitized other assets apart from mortgages, including the world's first shipping securitization in 2002 and a leveraged loans arbitrage CDO this year. We intend to stay active in these asset classes and repeat transactions. Also, we would like to be able to broaden our scope further, for instance, to commercial mortgages. CMBS in the Dutch market is still a relatively rare phenomenon, but we believe other market participants are considering these types of deals as well.
Talk of establishing a European Freddie Mac/Fannie Mae type agency has resurfaced in recent weeks. Is this kind of agency feasible?
Given the current diversity in terms of mortgage products, for example legal terms, and fixed versus floating interest rates, and the different types of mortgage providers and distributors throughout Europe, NIB Capital is of the opinion that such an agency is still far away.