SEPTEMBER 2014

A study released by the Society of Chartered Surveyors

estimated that 35,000 new homes are required in Dublin

Ireland‟s GDP has grown by 7.7% year on year

Bank of Ireland has transferred approximately €223 million-

worth of mortgages to Dilosk

HML News

Time for a fresh look at free

debt advice? Peter Munro, head of business development –

creditors at Payplan, discusses the benefits

lenders and customers can enjoy when

partnering with a debt advice provider. The term „customer outcome‟ now dominates

dialogue in the collections arena. All firms are

tasked with evidencing that they are delivering

good customer outcomes and debates have

been plentiful around how such things can be

measured and quantified.

I have witnessed many mortgage lenders

wrestling with the concept of a good outcome

(too little forbearance vs too much

forbearance, and everything inbetween) and it

is clear that in today‟s environment that

delivering a good outcome cannot be achieved

by focusing on the customer‟s mortgage needs

alone – a more holistic approach is key.

A classic example is where a customer has

unsecured debt problems running alongside

their mortgage arrears. Completing an income

and expenditure form and setting up an

affordable payment arrangement on the

mortgage may have previously been deemed

„enough‟, but if you have not tried to support

the customer with their unsecured problem,

have you really delivered a good outcome?

“The customer should be signposted to free

money advice” would be a common response

to the above, but how do you measure the

effectiveness of that signposting? Does the

customer actually seek the advice they need?

What happens next on that journey?

Working with lenders to help customers

Over the last 18 months, Payplan has been

working closely with forward-thinking lenders

that recognise that simply signposting a

customer to free debt advice is not enough and

that their customers deserve access to a fully

joined up and managed service. By using

Payplan‟s secured referral process they can:

• transfer customers straight through to free

debt advice at that crucial „moment of truth‟

• exchange key mortgage information to

ensure complete clarity for all parties

• receive detailed outcome Management

Information on every referral, solving the

„debt advice black hole‟ and enabling full

performance management

Lenders using this service have been able to

tangibly demonstrate the value of free debt

advice to their customers and also to their

bottom line, as the Payplan intervention helps

customers to prioritise their mortgage

arrangements and resolve unsecured debt

problems – a great outcome by any measure.

The Financial Conduct Authority in the UK

certainly sees the value in free debt advice

partnerships, with its February arrears and

forbearance thematic review concluding:

“Firms that made it easy for customers to obtain

early money advice saw better outcomes. One

lender had piloted a „hot key‟ system which

allowed agents to transfer borrowers directly to

a third-party debt advice agency. The advice

was independent and free of charge to the

borrower. As a result of these referrals, some

borrowers prioritised their essential outgoings

against non-essential expenditure. The lender

experienced up to a 50% increase in payments

received, resulting in reduced levels of arrears

and improved outcomes for both borrowers and

the firm.”

Continued over the page

HML News

The Institute of Money Advisors also sees the

benefits of lenders and advice providers

working strategically together. In 2013, it

awarded Payplan its Best Partnership award,

stating:

“It was fully evident that Payplan’s nomination

demonstrated all the attributes we would hope

to see in the Best Partnership category:

innovative thinking, creativity in collaboration,

the formation of partnerships through

breakthrough techniques, effective use of

resources and a willingness to explore non-

traditional methods in solving age old

problems. The judges were most impressed

with the outcomes Payplan generated for

homeowners with problematic debt, which is

perhaps the most robust test of the success of

any new initiative. They are worthy winners.”

So as the debate around delivering good

customer outcomes continues, now really is

the time to take a fresh look at free debt advice

- a now key component in any customer-

focused collections strategy.

HML attended the 2014

International Corporate

Restructuring Summit.

David Kelly and Mel Smith attended the event

in Dublin on 17 September, where speakers

included Brendan O‟Connor, head of Financial

Solutions Group at AIB and Eddie Byrne,

director of asset management at Hudson

Advisors Ireland.

Tom McAleese, managing director of Alvarez

& Marsal Ireland, also spoke at the event. He

said that from November, the top three banks

in each European Central Bank country will be

covered by the Single Supervisroy

Mechanism.

Alvarez & Marsal Ireland predict that AIB will

pass the stress tests (with results announced

at the end of October) in first place, followed

by the Bank of Ireland and permanent tsb.

Delegates also heard from Fabrizio Grena,

executive director, of European Special

Situations Group at Goldman Sachs.

He noted that 30% of asset trading activity in

Europe has taken place in Ireland since the

economic collapse. However, by Q2 2015, the

country will be „cooked‟ when it comes to

investor opportunity. Instead, Spain currently

represents the best opportunity for those

looking to take part in asset trading.

Further commentary from the event will be

available in the October edition of Ireland

Source.

HML Ireland Update

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

* Since revised down to 11.3%

Consumer Price Index (Central

Statistics Office)

AUG ‘14

0.4%

JULY ‘14

0.3%

JUNE ‘14

0.4%

European Central Bank (ECB)

Base Rate

SEP ‘14

0.05%

AUG ‘14

0.15%

JULY ‘14

0.15%

Unemployment Rate (Central

Statistics Office)

AUGUST ‘14

11.2%

JULY ‘14

11.5%*

JUNE ‘14

11.6%

Average National House Prices

(Myhome.ie)

Q2 ‘14

Up 1.3% from Q1

€190,216

Q1 ’14

Down 0.7% from Q4

€187,736

Q4 ’13

Down 0.9% from Q3

€189,086

Arrears

(Central Bank of Ireland - CBI)

PDH – total

PDH – 90 days+

BTL – total

BTL – 90 days+

Q2 ’14

126,005

90,343

39.669

31,749

Q1 ’14

132,217

93,106

39,361

31,048

Q4 ’13

136,564

96,474

39,250

30,706

Home Repossessions (CBI)

PDH

BTL

Q2 ‘14

1,110

611

Q1 ‘14

1,116

568

Q4 ‘13

1,014

503

Industry Statistics

Consumer Price Index

The CPI in August was 0.4% higher than

August 2013, down 0.1% on July. Notable

upward pressures came from the education

(4.5%), alcoholic beverages and tobacco

(3.9%) and miscellaneous goods and services

(2.9%) sectors.

This was partially offset by declines in

communications (-4.6%) and food and non-

alcoholic beverages (-2.6%).

ECB Interest Rate

The ECB base rate has been slashed by ten

basis points to 0.05% in September, a historic

low. Mario Draghi, president of the

ECB, said: “Following four quarters of

moderate expansion, euro area real GDP

remained unchanged in the second quarter of

this year compared with the previous quarter.

While it partly reflected one-off factors, this

outcome was weaker than expected.”

Unemployment Rate

The unemployment rate stood at 11.2% in

August 2014, down from 12.7% in the same

month in 2013. There were 380,100

unemployed individuals in August, a monthly

fall of 2,900 people.

House Prices

The national average house price in Ireland

stood at €190,216 in Q2 2014, a 1.3%

increase on the previous quarter, according to

Myhome.ie‟s analysis of asking prices.

This is the first positive price growth in almost

eight years.

Commenting, Angela Keegan,

managing director of Myhome.ie,

said: "It‟s heartening to see asking prices

nationally rise for the first time in eight years.

While this is an important landmark on the

road to recovery, we are still much closer to

the start of that journey then the finish.

“The average mix-adjusted asking price in

Dublin is now 34% higher than the national

figure. This is on a par with trends seen at the

height of the boom when the difference stood at

35%, albeit prices are at a much lower base.”

Arrears

Principal Dwelling Houses (PDH)

The number of PDH mortgage accounts in

arrears declined by 4.7% between Q1 2014 and

Q2 2014. Out of the total mortgage accounts,

16.5% were in arrears, representing 126,005.

The number of PDH mortgage accounts in over

90 days of arrears also declined during Q2,

falling by 3%. These accounts totalled 90,343,

11.8% of all the PDH mortgages in arrears.

However, accounts in arrears of more than 720

days increased by 5% during Q2 and currently

account for almost 5% of total PDH mortgage

accounts. The outstanding balance of such

accounts was just under €8 billion at the end of

June.

Buy-to-let (BTL)

The number of BTL mortgage accounts in

arrears increased between Q1 and Q2 2014 to

39,669 (27.5% of the total accounts) from

39,361 (27.2% of the total accounts).

Home Repossessions

At the end of Q2 2014, there were 1,110 PDHs

and 611 BTLs in lenders‟ possession. Of the

PDHs, 299 were taken into possession during

the quarter, 89 of which were the result of a

court order, while 210 were abandoned or

voluntarily surrendered.

Top News Stories

Investec has sold Start and

Kensington.

Lone Star has purchased Start Mortgages in

full. Investec said it decided to sell the £540

million (€692 million) Irish mortgage book in

order to simplify its banking model.

Investec wants to reshape its specialist

banking business and reduce its legacy non-

core operations.

In addition, Investec‟s UK lender Kensington

has been sold to Blackstone and TPG Special

Situations Partners (TSSP). The deal, reported

to be worth £180 million (€229 million), is

subject to regulatory approval.

Blackstone and TSSP plan to develop

Kensington‟s mortgage lending business and

have appointed Ian Henderson as group chief

executive. He previously held the role of chief

executive of Shawbrook.

35,000 new homes are

required in Dublin.

That is according to a new study by the

Society of Chartered Surveyors, which noted

that this level of housing needs to be built over

the next four years in order to meet demand.

Planning approval has, however, only been

granted for 26,000 properties. The Dublin City

Council area is where demand is highest, at

almost 14,000 units, with planning permission

currently in place for 1,200.

At the other end of the scale, planning

permission has been given for almost 17,000

homes in Fingal County Council, but there is

demand for just under 10,000.

The report follows the announcement that the

National Asset Management Agency (NAMA)

will fund the delivery of 4,500 new homes by the

end of 2016 in Dublin.

Brendan McDonagh, chief executive officer of

NAMA, made the comments at the National

Housing Supply Conference. Other speakers

included finance minister Michael Noonan and

Marian Finegan, chief economist at Sherry

Fitzgerald Group.

Mr McDonagh said NAMA‟s project

management would support receivers and

debtors in addressing title and legal issues, as

well as construction, procurement and disposal.

Ireland‟s GDP has grown

7.7% year-on-year. Figures for Q2 from exchequer returns also

revealed that GNP has climbed by 9%. This is

the strongest growth rate recorded since early

2000s.

Minister for finance Michael Noonan

said: “The turnaround that we are seeing in

the Irish economy is a direct consequence of

the policies pursued by this government and the

sacrifices made by the Irish people.

“Consolidation of close to 20% of GDP has

been introduced along with major structural

reforms designed to boost the competitiveness

of the Irish economy. The specific measures

introduced over the past three years to repair

and grow key sectors of our economy have also

made a significant contribution.”

Top News Stories

House prices have climbed

almost 15% in the year to

August. The latest figures from the Central Statistics

Office show that residential property prices

rose by 2.3% over August, up from the 2%

increase in July. In August 2013, residential

property prices rose by 0.9%.

In Dublin, residential property values

increased by 3.5% over August, marking an

increase over the year of 25.1%.

Despite the increase, house prices in Dublin

are more than 39% lower than at their peak in

early 2007.

Bank of Ireland has sold a

pool of mortgages to Dilosk. The transfer of approximately €223 million-

worth of mortgages from the bank to Dilosk

took place on 1 September.

Dilosk has also acquired the ICS Building

Society brand and distribution platform. Letters

have been issued to customers regarding the

transfer.

Fergal McGrath, chief executive

officer of Dilosk, said: “My colleagues

and I would like to welcome our new

customers to Dilosk. We look forward to

providing them with high-quality service to

meet their needs now and into the future.

“I want to thank everyone from all teams for all

the effort and attention to detail that went into

ensuring such a smooth and efficient transfer

process. I would also like to welcome our new

colleagues to Dilosk and we wish them every

success.”

Dilosk is headquartered in Merrion Square,

Dublin and was recently granted Central Bank

of Ireland authorisation to operate as a retail

credit firm. It is regulated by the Central Bank,

and its new customers will be afforded all of the

mortgage regulatory code protections.

permanent tsb has seen

arrears levels decline by

21%. The reduction has been seen for mortgage

accounts in arrears of more than 90 days and is

since the start of 2014. The bank revealed that

25,000 borrowers have been offered

restructuring arrangements via its asset

management unit (AMU). More than 27,000

Standard Financial Statements have been

received from customers between January and

the end of August.

The Irish Times reported Shane

O‟Sullivan, managing director of the

AMU, as saying: “The split mortgage is a

key offering and our experience is that home

loan customers are very positive about the

arrangement.

“We charge 0% interest on the warehoused

section of the mortgage and we review a

customer‟s circumstances - typically every three

years - with a view to ultimately eliminating the

warehoused amount.

“Our experience is very clear on this; when

customers engage with the bank on their

arrears they are receiving practical and

workable restructurings which they understand

and which they can live with.”