robbie sargent - gilde schuldhulpverlening

Special ServicingThe UK vs. The Netherlands

Robbie Sargent, Senior Director

4 September 2013

Agenda

A Changing Environment

UK Best Practices

The Netherlands Playing Catch-Up

Key Rating Drivers

Conclusion

www.fitchratings.com


The world has changed since 2008…..

• The UK and Netherlands mortgage markets have seen drastic changes

• Impacted on not only origination, but servicing practices

• More focus on what servicers are doing

• Investors

• Regulators

• The courts

• Rating agencies…..


A Changing Environment (cont.)

-10

-5

0

5

10

15

20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(%) UK change NL change

The UK and the Netherlands Faced Significant Challenges

Source: Office of National Statistics and Centraal Bureau voor de statistiek

Mix Adjusted House Prices Index Annual Change



0

5

10

15

20

Sep 06 Jan 08 May 09 Oct 10 Feb 12 Jul 13

(%)

Leek Finance Number Seventeen PLC Leek Finance Number Eighteen PlcLeek Finance Number Nineteen Plc Leek Finance Number Twenty PlcLeek Finance Number Twenty One PLC Leek Finance Number Twenty Two PLCGreat Hall Mortgages No. 1 plc (Series 2006-1) Great Hall Mortgages No. 1 plc (Series 2007-1)Great Hall Mortgages No. 1 plc (Series 2007-2)

UK Arrears Peaked Mid-2009

Source: Fitch

3M+ Arrears



0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Jul 10 Jan 11 Aug 11 Mar 12 Oct 12 May 13

(%)Saecure 7 (6.1% NHG) Orange Lion IV (0% NHG)Orange Lion V (31% NHG) Green Lion I (0% NHG)

Dutch Arrears Still on An Upward Trend

Source: Investor reports

Selection of Dutch Transactions – 3 Month Plus Arrears

Agenda


UK Best Practices


Key Rating Drivers

Conclusion


UK Best Practices

What did the UK do to arrest the increasing arrears?

• Development of servicing tools to enable appropriate action

• Default probability models

• Risk Modelling/Behavioural Scoring

• Income and expenditure analysis

• Right time to call analysis/modelling

• Dialler strategy

• Use of credit reference data

• Borrower/loan segmentation

• Self-cure scorecards

• Forbearance

Agenda


UK Best Practices


Key Rating Drivers

Conclusion


The Netherlands Playing Catch-Up?

• Difficulties in the NL arrived later than the UK, and still might get worse

• Comparison to the UK

• Default probability models

• Risk Modelling/Behavioural Scoring

• Income and expenditure analysis

• Right time to call analysis/modelling

• Dialler strategy

• Use of credit reference data

• Borrower/loan segmentation

• Self-cure scorecards

• Forbearance ??

Agenda


UK Best Practices


Key Rating Drivers

Conclusion


Key Rating Drivers

What has driven special servicer ratings in the UK?

Innovative Technology

Experienced Management

Arrears Performance

Staff TrainingPractical Experience

Risk Management


Key Rating Drivers (cont.)

What has driven special servicer ratings in the NL?

Innovative Technology

Experienced Management

Arrears Performance

Staff TrainingPractical Experience

Risk Management


Key Rating Drivers (cont.)

• Fitch sees the Netherlands following closely in the footsteps of the UK

• The key reasons for upgrades in special servicer ratings are the same

• A slight timeline lag in economic activity driven these changes later

• But, UK continues to evolve, and the NL should take care to pay attention

What has driven special servicer ratings in the NL?


Special Servicer Rating Transition

Special Servicer Rating

Company Country Sep 13 Dec 09 Transition

Acenden UK RSS2 RSS3+ 2 notches

Charter Court UK RSS2- n.a. n.a.

Crown UK RSS3+ RSS3- 2 notches

HML UK RSS2 RSS3- 4 notches

KMC UK RSS2+ RSS2+ 0

Oakwood UK RSS2+ RSS2- 2 notches

Paratus UK RSS2 n.a. n.a.

CMIS NL RSS2- n.a. n.a.

Hypocasso NL RSS2- n.a. n.a.

Quion NL RSS2 RSS2- 1 notch

Source: Fitch

Agenda


UK Best Practices


Key Rating Drivers

Conclusion


• A new landscape for both the UK and the Netherlands demanding a

new approach

• Problems in the Netherlands came after the UK, hence a lag in servicer

innovation and development

• Competition drives innovation and improved performance

• Regulatory rules somewhat restricts servicing practices

• A recognition that things needed to change, and The Netherlands has

come a long way in the last 12 – 18 months

• Never stop looking to develop!

Conclusion


Questions?


People in Pursuit of Answers


Disclaimer

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address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned.

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robbie sargent - gilde schuldhulpverlening

Economy & Finance