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20 May 2010
London, 20 May 2010 -- Moody's Investors Service said today that Oakwood Homeloans Limited
(OHL; not rated) has maintained its special servicer infrastructure
since the rating agency's previous visit.
As part of Moody's surveillance process of residential mortgage-backed
securities (RMBS) transactions, it regularly meets with servicers
to monitor the quality of the servicer and discuss changes to the servicing
infrastructure since Moody's previous visit. On 24 March,
Moody's met with OHL, which is the special servicer for the
following four Moody's-rated outstanding UK RMBS transactions:
Alba 2005-1 plc, Alba 2006-1 plc, Alba 2006-2
plc and Alba 2007-1 plc. As of February 2010, the
total outstanding balance of these four transactions was GBP1.3billion.
As special servicer for these transactions, OHL's responsibilities
include (i) overseeing the day-to-day operations of Homeloan
Management Ltd (HML, SQ2+), which is acting as the loan
administrator for these transactions; (ii) determining the servicer's
strategy; (iii) making decisions on cases which are outside HML's
mandate; and (iv) 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
MOODY'S UPDATED OPINION ON OHL'S SPECIAL SERVICING OPERATION.
Since Moody's prior review, OHL has outsourced its special
servicing activities to Engage, an affiliated company of Oakwood
Global Finance LLP (Oakwood Global) incorporated in March 2008.
The servicing infrastructure was transferred from Oakwood Global to Engage
(the staff and the IT infrastructure from Oakwood Global are now made
available to Engage by way of a services agreement). Moody's
believes that the continued outsourcing and transfer of servicing to Engage
has had no servicing impact on the Alba transactions.
Moody's observes that only one OHL's board member remains in his
current position since its prior review in February 2008. However,
Moody's notes that the two newcomers since Moody's previous
visit have now been in their positions for approximately one year and
have extensive experience in servicing and work-out resolutions
gained in Europe and in the US. This somewhat mitigates the continuity
risk and the absence of clear and consistent objectives and strategy that
may be associated with high turnover at board level and senior management.
Moody's views positively the very low turnover of Engage's
staff and the experience of the staff, which it estimates to be
more than five years on average.
OHL's call centre (operated by HML) opening hours seem to be in
line with market practices. OHL's policy is to start calling
borrowers within 48 hours of a failed direct debit, like most of
OHL currently does not use updated credit bureau information when assessing
a borrower's financial condition (i.e. performing
an income and expenditure analysis) in order to offer an arrangement-to-pay
(ATP) or a loan modification. Moody's would welcome the use
of credit bureau data as it validates a borrower's indebtedness
and provides additional comfort that the proposed repayment plan may be
sustainable. The ratio of honoured ATPs as a percentage of ATPs
due has reduced since its peak in September 2009 and seems to be lower
than some of its peers.
For the past year, OHL has used a Net Present Value (NPV) model
to determine the strategy to maximise recovery value. Moody's
considers this approach positive even though we did not review in detail
the proprietary model. As part of this analysis, OHL conducts
a desktop valuation or a drive-by valuation of the real estate
property. OHL informed Moody's that the output of the model
is one element which forms the basis for its final decision (e.g.
loan modification, an ATP, or start of legal proceedings).
While OHL seems to sell repossessed property more rapidly than some of
its peers (Moody's calculated UK non-conforming 2009 market
average: 170 days), it seems to achieve a slightly lower sale
price as a percentage of the asking price in comparison to Moody's
calculated UK non-conforming market average of 92%.
Moody's believes that OHL would benefit from improving its reporting
infrastructure from its third party agents (solicitors and asset managers)
as this would ensure that information is comparable and enhance the overall
monitoring and control framework.
While OHL is a subsidiary of Credit Suisse, the fact that it has
no employees apart from its directors, differentiates it from its
peer group. Since March 2010, Credit Suisse fully owns OHL.
SECURITISED PORTFOLIO PERFORMANCE
As of February 2010 the 90+ delinquency rate as a percentage of the
current balance was 12.77% for the Alba index, which
is 34%, lower than the UK non-conforming index (19.22%).
Alba cumulative losses as a percentage of the original pool balance was
1.85%, which is 22% higher than the UK non-conforming
OHL'S SPECIAL SERVICING INFRASTRUCTURE - UPDATE
Since our previous review, the company organisation structure has
remained relatively constant and the number of staff servicing the Alba
transactions has increased by seven to 11. The staff has prior
relevant work experience, gained either at a third-party
servicer or within the servicing arms of a financial institutions or a
related third party (e.g. at a solicitor's firm).
The Engage team servicing the Alba transactions is not necessarily fully
dedicated to these transactions and may work for other clients.
A workflow has been implemented to manage cases falling outside HML's
mandate or requesting approval to proceed with the litigation process.
Like its peers, Engage (on behalf of OHL) now reviews all cases
before beginning the foreclosure process to ensure that all solutions
have been considered.
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.
Structured Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's updates on Oakwood Homeloans Ltd as special servicer of four Alba UK RMBS deals
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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