Mortgage Loans are set to only run 5 years due to UNAFFORDABLE APPROVAL of $800
billion worth of toxic loans due to slack lending practices running rampant in Australia.
Notice how the implosion intentionally 'coincides' with the RMBS expiry dates.........
From the RBA archives:
To ensure that the RMBS can be redeemed before it becomes uneconomic for the SPV
to service the loans and to protect investors from being left with a small, illiquid rump
of stock once the bulk of loans have been repaid, most RMBS include an option for the
originator to buy back the loans and redeem the RMBS after a certain date or when
the aggregate principal outstanding on the mortgage pool falls below a stated
threshold (say 10 per cent) of its original face value.
The option also facilitates the return of any profits from the SPV to the mortgage
originator. If the option is not called,
a higher interest rate may become payable on the securities.
The expected life at issue of most RMBS is typically two to five years.
http://www.rba.gov.au/publications/fsr/2004/sep/pdf/0904-1.pdf