Residential mortgage advisors in the UK are finding demand for their services from private equity real estate firms, which have become active bidders on loan portfolio sales over the past couple of years. PERE caught up with one such advisor, Acenden Mortgage Servicing Solutions, and spoke to its director of business origination Alex Maddox.
PERE: How did Acenden start out in business?
Alex Maddox: Lehman Brothers set up a firm called Capstone Mortgage Services, which was a merger of various mortgage operations in the UK and Ireland. It changed names to Acenden in 2010, but it still is majority owned by the Lehman estate.
PERE: What are you seeing in the market?
Maddox: A number of entities that have UK or Irish subsidiaries are looking to potentially sell residential portfolios. In many cases, the potential buyers are private equity real estate funds or hedge funds who have a distressed angle, and we advise them. Most need the people to manage a portfolio, while others want advice in the bid stages.
PERE: How many specialist loan advisors exist in the UK?
Maddox: I would say there are four or five servicers, including us, that can provide the operational capabilities for groups that have bought portfolios. Some firms like Fortress Investment Group and Apollo Global Management have their own, but we also get involved in the bid phase, providing analytics to help them understand the potential performance of a portfolio under different economic scenarios.
PERE: Is this an area of the advisory world that is growing?
Maddox: Yes. As private equity firms get into the residential loan market, they need access to analytics via advisors like our firm. Mortgage portfolios have always traded, but it was different a few years ago when there was a benign economic environment. Now, people are operating in a different market.
PERE: How does the market differ from the US?
Maddox: The US has a much more developed and active trading market. In the US, forecasting models can be bought ‘off the shelf’, and there is a lot more publicly available data so investors can work up their own models. A lot of the mortgages in the US are traded whereas, in the UK, mortgages are mainly kept by the banks and never move.
PERE: Are volumes for residential portfolios rising then?
Maddox: There has been a steady flow of deals, but what has happened is that we have seen more debt providers come in to help finance the acquisition. As a result, prices have improved quite a bit and possibly more portfolios will come out.
There are only a small number of UK-based advisors specializing in residential property loans. Here are some of the main players:
Home Loan Management
The serviced mortgage loan firm is owned by the Skipton Building Society and was established in 1988. The firm services some of the biggest mortgage lenders in the UK and, as of June 2011, it employs around 1,410 staff.
The London-based firm provides advice on asset valuation and loan book risk assessment. It recently was taken over by New York-based analytics firm MIAC.
Exact Mortgage Experts
The Wolverhampton-based firm advises on asset trading, mortgage servicing and mortgage orientation. It is owned by Charter Court Financial Services, which provides mortgage servicing and asset management services to residential mortgage asset owners.
Acenden Mortgage Service Solutions
Ascenden provides data and analytics and special servicing. It is the highest Fitch-rated residential mortgage special servicer in the UK and the only primary servicer ranked ‘strong’ by Standard & Poor’s.