Veenman is also a board member of GMAC RFC Nederland, an originator of mortgages in the Dutch market, based in the Hague. In addition to the business in the Netherlands, GMAC RFC is also active in Germany and France.
In terms of mortgage origination, GMAC RFC Nederland has been quite aggressive. How has the company been able to gain market share in the Netherlands, France and Germany?
With respect to Continental Europe, we are originating mortgages only in the Netherlands. In Germany and France we have acquired a mortgage broker, CreditWeb, and we expect to launch our lending activities in Germany in the next three to six months.
We have been able to develop momentum in the Dutch market based on three factors: RFC's focus on creating a highly efficient lending platform for our clients, such as master brokers, insurance companies and mortgage advisory chains. We have accomplished this by using a fully automated underwriting engine of Stater, which is a 100% subsidiary of ABN-AMRO.
What is your target for growth and how do you expect to finance that growth?
With respect to the Dutch activities, we have seen strong growth in origination volumes since we started business in 2001. Last year, we originated about E600 million and this year we are on track to originate approximately E1 billion. Our ambition is to take a 5% market share in the Dutch intermediary market within the next two to three years.
In Germany, there will be a lot of opportunities both from a direct origination perspective as well as from a portfolio acquisitions. Many lenders are looking to sell assets and still get off-balance sheet treatment under [International Accounting Standards]. GMAC RFC will actively consider these types of portfolio acquisitions.
Does GMAC RFC have other financing available aside from the residential mortgage-backed securities market?
With respect to financing, obviously our model is mainly to tap the RMBS market, however, we do have other means of financing either through conduits or our parent company's treasury. In addition to those channels, we expect that whole loan trades like we see in the U.S. and U.K. will ultimately also become feasible in the European market.
Your business model is built around securitization. How sustainable do you expect that model to be in a post-Basel II environment?
Securitization is currently a very important aspect of our business. Of all the financing options available, it provides the most efficient access to funding to a company like RFC.
As the investor base is changing in Europe, we feel that in future there will be even more interest in structured finance products because these products can be tailored to address duration or yield objectives. Providing liquidity to investors in highly rated securities is a long-term commitment for RFC and we don't have any reason to believe that Basel II will change that.
So far, GMAC RFC has completed two RMBS transactions. What were some of the difficulties you encountered and how do you feel about pricing levels?
Overall, the experience in both transactions has been positive. Obviously, the focus of our first transaction was on our short history as a Dutch company. Investors got comfortable with that issue, because RFC is a well known issuer the U.S. and U.K. and secondly, that the Dutch local management had a track record with another Dutch mortgage lender [NIB Capital].
In general, I think pricing in our first deal reflected this lack of a track record to a certain extent. Pricing on our second deal reflected a market with a lot of RMBS deals being announced and marketed at the same time. But, taking that into consideration, I believe that we are now much closer to pricing of our peer group of RMBS issuers in the Netherlands.
When do you expect to complete a RMBS deal with German collateral?
I would expect to issue a security with German collateral that has been originated by RFC in 2004. However, we may issue a security this year using collateral that we have acquired from other German lenders.
What criteria does GMAC RFC use in selecting a lead underwriter for a transaction?
Obviously, like any other issuer we think distribution capacity, marketing skills and the ability to support a deal by providing secondary liquidity to investors are all very important features. In addition, RFC highly values innovative ideas that make our capital structures more efficient. We have used Schroder Salomon Smith Barney in both our deals as lead-arranger and we are happy with the result. In addition to SSSB, we have used Deutsche Bank, ABN AMRO and RFSC International as co-managers, all of whom have added to the success of transactions.