APRIL 2014

Eurozone inflation has dropped to its lowest level in four years tostand at 0.5%. Some within the industry suggest the ECB could move toIncrease the base rate

HML has been shortlisted for a European Outsourcing Association awardfor helping its Irish clients meet the Single Euro Payments Area regulation

The Bank of Ireland has ambitious plans to expand within the UK

HML News

HML has been shortlisted for a European Outsourcing Association (EOA) award.

We have been shortlisted in the European IT Outsourcing Project of the Year category for our work in assisting our Irish lenders in being ready for the Single Euro Payments Area (SEPA) regulation.

The SEPA Regulation was adopted in 2012 and had an initial deadline of February 1st 2014 when European banks had to ensure direct debits and credit transfers adhered to SEPA. As a European Union member, using the euro, any Republic of Ireland direct debit transactions must comply with SEPA regulation as defined by the European Payments Council and the Irish Payment Services Organisation. However, due to delays in some member states of implementing the new system, the deadline was pushed back until August 1st 2014.

• HML exceeded the original SEPA deadline by three months and has met the new deadline eight months early

• 2,209 transactions were carried out under the new system in February 2014 alone. This totals €1,590,101.90 across all of HML’s Irish clients and 37% of all cash collected on HML’s Irish portfolio

• Meeting client SLAs means no unnecessary cost was incurred either by HML or its clients, and it also prevented customer distress from occurring by being asked to make their mortgage or arrears payments by another means

Padraig Collery, Projects Manager at Start Mortgages, said: “HML worked extremely hard on this project and delivered a very high performance, not only in ensuring that Start was ready well ahead of the SEPA deadline, but also in the partnership approach they took. They kept us involved and updated on progress at all times and the project relationship management I experienced means I’d have no hesitation with working with the HML project team on future business critical projects.

“The project was launched almost a year ago and was one of the most critical and challenging projects undertaken between Start, HML and our third-party direct debit collections service provider. We had an issue at the final test which was resolved from an exchange of explanations and agreement on a plan to resolve the issue. I very much appreciate the openness in which HML managed the project. The project manager never hesitated in letting me know if there was a problem. This approach was central to the confidence we had in each other during the project and reflected best practice towards open and honest communications and relationship management.”

Padraig Collery, Start Mortgages

Industry Statistics

Date reflects what the statistic was during that period, rather than when the statistic was published

Consumer Price Index (Central Statistics Office)

MARCH ’14

0.2%

FEB ’14

-0.1%

JAN ’14

0.2%

European Central Bank (ECB) Base Rate

APRIL ‘14

0.25%

MAR ‘14

0.25%

FEB ‘14

0.25%

Unemployment Rate (Central Statistics Office)

MARCH ’14

11.8%

FEB ’14

11.9%

JAN ’14

12%

Average National House Prices (MyHome.ie)

Q1 ’14

Down 0.7% from Q4

€187,736

Q4 ’13

Down 0.9% from Q3

€189,086

Q3 ’13

Down 1.4% from Q2

€190,790

Arrears(Central Bank of Ireland - CBI)

PDH – total

PDH – 90 days+

BTL – total

BTL – 90 days+

Q4 ’13

136,564

96,474

39,250

30,706

Q3 ’13

141,520

99,189

40,426

31,227

Q2 ’13

142,892

97,874

39,948

30,326

Home Repossessions (CBI)

PDH

BTL

Q4 ‘13

1,014

503

Q3 ‘13

1,050

516

Q2 ‘13

1,001

502

Industry Statistics

Consumer Price IndexThe CPI in March was 0.2% higher than the same month in 2013. It has also increased by 0.2% from February, with the most notable upward pressures coming from Clothing and Footwear (3%), Miscellaneous Goods and Services (2.3%) and Transport (1.2%).

This was partially offset by lower prices in the Food and Non-Alcoholic Beverages and Communications categories.

ECB Interest RateThe ECB base rate remains at 0.25%, although with eurozone inflation falling to 0.5%, some in the market are suggesting that the rate could soon rise. Inflation is well below the ECB’s 2% target and is at its lowest level for more than four years.

Unemployment RateThe unemployment rate declined by 0.1% from February to March to 11.8%, representing 396,900 individuals out of work. In the same month in 2013, the unemployment rate stood at 13.7%.

House PricesThe national average house price in Ireland stood at €187,736 in Q1 2014, a 0.7% decline on the previous quarter, but the slowest rate in value decline for six years, according to MyHome. However, it still represents an almost 5% decline on an annual basis.

Commenting, Angela Keegan, managing director of MyHome, said: “The volatility in asking prices in Q1 reflects a property market in transition, although a study of transaction data does show the markets have bottomed out both nationally and in Dublin.”

In comparison, the average price of a residential property in Dublin rose over the quarter by 1.3% to reach €244,480.

This represents the largest quarterly increase in asking prices since the property market bottomed out 12 months ago, with asking price growth climbing by 3.7% on an annual basis.

ArrearsPrincipal Dwelling Houses (PDH)

The number of PDH mortgage accounts in arrears declined by 3.3% between Q3 and Q4 2013. Almost 18% of accounts were in arrears by the end of Q4 2013, representing a total of 136,564.

There was a 2.3% fall in the number of accounts in arrears of more than 90 days, the Central Bank of Ireland revealed.

However, accounts in arrears of more than 720 days increased to 33,589, representing almost 63% of outstanding arrears on PDHs and balances of €6.9 billion.

Buy-to-let (BTL)

The number of BTL mortgage accounts in arrears decline during Q4 2013 to 39,250, representing 27% of accounts. However, there was also an increase in the number of those in arrears of more than 720 days, representing 8.4% of accounts with balances of €3.9 billion.

Home RepossessionsAt the end of Q4 2013, there were 1,014 PDHs and 503 BTLs in lenders’ possession. Of the PDHs, 168 were taken into possession during the quarter, 63 of which were the result of a court order, while 105 were abandoned or voluntarily surrendered.

Top News Stories

The Bank of Ireland (BOI) has ambitious plans to expand within the UK.In an interview with The Sunday Telegraph, BOI UK chief executive Des Crowley said it plans to become a “leading challenger” to Barclays and Lloyds Banking Group by increasing services through its Post Office network.

“We want to be their leading challenger, providing simple, transparent, accessible products to consumers right across Great Britain as an alternative to the high street banks. Twenty million potential customers walk through the

doors of the Post Office every week,” Mr Crowley told the newspaper.

The BOI and Post Office partnership, which celebrates its 10th anniversary this year, has been extended to 2023.

US funds Lone Star and Oaktree Capital have purchased more than half of an IBRC mortgage portfolio.Of the €1.8 billion Project Sand portfolio, 64% has been sold to the two US funds. In addition, 85% of the €9.3 billion Project Stone portfolio has been sold to Goldman Sachs, CarVal Investors, Lone Star and Deutsche Bank.

In a statement, KPMG said: “The sales process for the IBRC loans, including their segmentation to meet demand from international buyers, has delivered a very positive result with over 90% of IBRC’s loan assets now sold within 14 months of the bank’s liquidation. The response of markets to the liquidation and sales process has exceeded our expectations.”

The National Asset Management Agency (NAMA) has sold its Northern Ireland loan portfolio.Cerberus Capital Management purchased the portfolio - which contains assets to the Republic of Ireland, Northern Ireland, Britain and other parts of Europe - for €5.4 billion.

NAMA chief executive Brendan McDonagh and chairman Frank Daly said: "This transaction represents a significant achievement for NAMA. It is NAMA’s biggest single transaction to date and we are satisfied that the sales process will deliver the best possible result for the Irish taxpayer.”

AIB’s David Duffy has stressed the need for customer-bank engagement in order to resolve the issue of mortgage arrears.In his opening speech at the Oireachtas

Committee, Mr Duffy said “engagement is the key that unlocks the conundrum for most distressed borrowers. Having established positive engagement, we can then proceed to agree an outcome that provides certainty to all parties and allows both customer and bank to move onto a sustainable financial arrangement”.

He added that involving consumer advocacy groups had led to a number of breakthroughs in several arrears cases and was one of many “new avenues” that the bank had explored.

Top News Stories

The BOI’s chief executive Richie Boucher has said the lender will not write off debt for those homeowners who voluntarily give up their properties.He was speaking to the Oireachtas Committee when he made the comments, adding that it was the bank’s “policy and practice” not to clear mortgage debt outside of legal processes such as bankruptcy.

Mr Boucher told independent TD Richard Boyd Barrett:“We have to take into consideration the responsibility that we have to our stakeholders to maximise the recovery of the loan,” the Irish Times reported.

David Hall, the founder of the Irish Mortgage Holders’ Association, is to run as an independent candidate in the Dublin West by-election.Mr Hall is set to contest the seat previously held by former independent TD Patrick Nulty. He has said he will campaign about debt management, an improved healthcare service and jobs,

The contest is scheduled for May 23rd, the same day as the local and European elections.

The Code of Conduct on Mortgage Arrears (CCMA) does not automatically apply to BTL properties.This is according to Cliodhna Walsh, solicitor at Beauchamps Solicitors. In a blog for HML, she explained that the CCMA doesn’t automatically apply to BTL properties that have been periodically occupied as primary residences.

Ms Walsh said: “Borrowers may now be encouraged to move into investment properties and notify the lender of their actions. A lender will have to make its objection to this intention known to the borrower in a clear and timely fashion. Furthermore, lenders should be aware that an objection such as this may not eliminate the requirement to apply the CCMA, as it will always be open to the court to assess the exact circumstance of the borrower in question and decide that on the facts, the Code should be applied.”

The restructuring market has become a mainstream operation in Ireland.Luke Charleton, restructuring partner at Ernst & Young, said in a guest blog for HML that this is in contrast to the height of the Celtic Tiger, when there were few very experienced insolvency restructuring practitioners.

He noted that the introduction of diplomas is a “welcome development which can only help the insolvency profession maintain the standards expected of it by the courts, secured lenders, borrowers and the general populace”.