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12 Apr 2011
London, 12 April 2011 -- Moody's Investors Service updates on Acenden Limited's (Acenden,
not rated) servicer and cash manager in 28 Moody's rated outstanding
RMBS transactions, since its last visit in July 2009. Over
the past two years, Acenden has made significant progress in implementing
an effective separation of the company from the rest of the Lehman group.
Moody's currently views positively the changes introduced in the
company's servicing and cash management operations, which
should help to support performance of the mortgage pools serviced by Acenden.
As part of its surveillance process of residential mortgage-backed
securities (RMBS) transactions, Moody's regularly meets with
servicers to monitor their quality and discuss any changes to the servicing
infrastructure since Moody's previous visit. On 25 February,
Moody's met with Acenden, which is the primary servicer, special
servicer and cash manager in 28 Moody's-rated outstanding RMBS
transactions, for a total outstanding balance of GBP5.3 billion:
- 11 transactions of the Eurosail series;
- 3 transactions of the Marble Arch series;
- 5 transactions of the Preferred series;
- 8 transactions of the Southern Pacific series; and
- 1 transaction of the EMF series.
As cash manager, primary and special servicer for these transactions,
Acenden's responsibilities include: (i) processing the payments
received from the borrowers and providing customer administration services;
(ii) administering borrowers who are in arrears with their payments;
(iii) managing the repossession and sale process of the real estate property,
which includes overseeing the third parties involved in these processes
(e.g. solicitors, asset managers); (iv) offering
loan modification and default management services; (v) manage cash
receipts and disbursements and maintain all cash management ledgers in
the transactions.
GENERAL INFORMATION
Acenden (previously known as Capstone) and its predecessors, have
been providing loan administration services since 1996, as part
of Lehman Brothers' mortgage operations in Europe. Currently
Acenden employs approximately 430 people and services approximately 75,000
loans, corresponding to GBP6.3 billion of assets.
Following the filing for bankruptcy of Lehman Brothers Holdings Inc.
in September 2008, Acenden has continued to operate as servicer
and cash manager in the UK market.
Storm Funding Limited (in administration as part of the Lehman estate)
currently holds 77% of Acenden's ordinary shares, with
Acenden's management holding the remaining 23%.
MOODY'S UPDATED OPINION ON ACENDEN'S SERVICING OPERATION
Moody's believes that Acenden has succeeded in implementing an effective
separation of the company from the rest of the Lehman group, although
a majority of the company's shares continue to be held by the Lehman
estate. Currently, Acenden has achieved complete separation
in terms of facilities, IT systems and infrastructure, legal
and compliance. Uncertainties remain in relation to the likelihood
and timing of the future divestment of the majority stake owned by the
Lehman group.
Moody's views positively Acenden's new internal audit function
which has been introduced since its last visit. The audit function
reports directly to the board, which strengthens Acenden's
internal control system. According to the new audit plan,
every auditable entity within Acenden is to be reviewed at least once
every three years. All major arrears cash processing, reconciliations,
collections, cash bond administration and IT are deemed highest
risk and are being audited at least once a year. This is accompanied
by a new operational risk management framework which improves the risk
control assessment, indicators and reporting.
Moody's notes that the staff turnover has remained fairly stable
over the last six months, oscillating between 22% and 24%,
although increasing from the 17% turnover rate as of the previous
visit. In 2010 senior management has also partially changed,
due to the replacement of the chief operating and chief finance officers.
Acenden also recruited a permanent IT director and created and filled
the new position of commercial director, in order to strengthen
senior management roles in light of the necessary transition from captive
to third-party servicer. As a result, Acenden currently
benefits from very experienced senior management, with an average
industry experience of above 19 years.
Acenden has so far benefited from a stable captive mortgage portfolio.
Current low level of prepayments in the UK non-conforming sector
have contributed to a slow down in the gradual amortisation of the portfolio.
However, Acenden business model depends on its capability to act
as a third party servicer on additional mortgage pools, which will
progressively compensate for its amortising captive portfolios.
Acenden has already taken some steps in this direction, by creating
a dedicated commercial team within the organisation and by opening up
an office in Ireland and acquiring the servicing of a small mortgage portfolio
in Ireland. As part of this strategy, Acenden has been recently
involved in a rebranding and marketing exercise and has also recently
launched a new customer website including full payment capabilities.
SECURITISED PORTFOLIO PERFORMANCE
The collateral performance of the RMBS transactions serviced by Acenden
has improved recently. Repossessions and 90d+ delinquencies
have decreased over the past year in line with market trend. Loans
delinquent by more than 90 days amount to approximately 18.6%
of the current portfolio balance, vs. 17.3%
for the UK non-conforming RMBS index, while outstanding repossessions
are approximately 1.0% of the current portfolio balance,
compared with 0.9% for the UK non-conforming RMBS
index. The cumulative losses as a percentage of the original pool
balance are approximately 2.5%, as opposed to 1.9%
for the UK non-conforming RMBS index.
Moody's observes that some UK non-conforming RMBS transactions
serviced by Acenden are performing worse than similarly seasoned deals,
which it believes is primarily due to pool characteristics. However,
Moody's views positively Acenden's servicing capabilities
in maximising the pool performance given the intrinsic quality and characteristics
of the underlying mortgages.
Moody's will continue to monitor closely the performance of Acenden's
servicing and cash management roles as part of the surveillance of Moody's-rated
transactions.
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
For further information, please visit our website directly or contact
Moody's Client Service Desk (+44 20) 7772 5454. Additional
information on the referenced Moody's rated RMBS transactions, including
the latest Performance Overview, is available at www.moodys.com.
London
Giacomo Bonetti
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's comments on Acenden's servicing operations
No Related Data.
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