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the world has changed. At Fitch Ratings, we have a strong and growing following in the structured finance market. If your investment guidelines don’t recognize Fitch, you are missing as much as 25% of new issue opportunities in the structured market. MARKET ACCESS is just one reason why Fitch is a different kind of rating agency.
To learn more about Fitch Ratings, visit www.fitchratings.com
Thank you for hanging in there, once again. We’ve been challenged by the industry to make servicing sexy. We’ll leave
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In the meantime, lights, camera, action and on with the show!
Toni Moss CEO, EuroCatalyst BV
it up to you to decide.
31 MAY – 1 JUNE 2006
• Although housing and real estate are fundamentally local activities, their funding is increasingly global. Despite natural differences among national markets (and indeed even among different states in the US), mortgage markets vary in form – but not function. When looking at a wider picture of the mortgage and real estate value chain, servicing is the bridge between primary and secondary markets. The best way to understand how mortgage markets really work – and to make them more efficient – is to view that value chain from the servicing perspec tive. • The key drivers for cross-border lending in Europe are securitisation, the ability to share risk and the ability to outsource servicing to third parties. Both securitisation and mortgag e insurance/ monoline schemes are advancing much faster than third-party servicing. There must be more efforts, initiatives and assistance – beyond the pioneering firms themselves – toward developing the third-party sector, and we thank the CMSA, CML and ESF for their willingn ess to support our collaboration toward this goal. • The loan-level and portfolio-wide information that servicers manage is the ultimate currency of the mortgage and real estate industry. As such, servicers are the repository of that information. The perception of servicing must change from the outdated view of it as the “originator’s back office” to a more accurate one of servicing as the shareholder and investor ’s front office. From that perspective, we hope to impact the way in which servicers acquire, process , distribute and protect the information that serves as the ultimate currency of the global mortgag e industry. • The sponsors, co-hosts and panellists in this event have demonstrated remarkable leadership, particularly when you consider that it is far easier to be against something than to be for it. Please recognise this fact, and thank them for it. I also express my gratitude to Louise Hunter, Samantha Armstrong, Claire Escudie r, Della Sullivan, Nishi Chundee, Christa Buttigieg and the team at Thomson Financial/IFR Confere nces who have worked tirelessly on event marketing and back office activities. My most heartfelt thanks go to the individuals and firms who continue to act as pioneers of the European servicing sector, most of whom you will see onstage at this event. As much as I have done my best in capturing their story in the programme content, I have had a bit of help. In particular, “Wheels” (or Helena Day, as opposed to a week) has been absolutely instrum ental in the content and design of the CMBS sessions. I would also like to thank Eddie Register for his personal assistance and FitchRat ings for allowing me full access to the universe of FitchResearch, truly a dream for insomniac informa tion hounds like me. Finally, as anyone who knows EuroCatalyst well will tell you, for the past five years my colleague Shirley Jackson has been the one who gets things done with the least amount of credit and the most productivity.
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As an investment advisory and market-positioning firm dedicated to accelera ting new market and cross-border entry, EuroCatalyst’s public efforts in Europe have been focused on developing and positioning the entire mortgage value chain across national borders. Howeve r, our heart lies firmly in the servicing sector, and this event is dedicated to all who share our goal of increasing the profile, improving the capabilities, creating the opportunities and highlighting the importa nce of servicing and administration across European mortgage markets. The event incorporates my own experience navigating European mortgage markets for the past nine years, initially as the Director of International Business Development for STATER at a time when it was thefrom first third-pa rty residential servicer in Continental Europe. While I have been the most identifia Letter Toni Moss ble individual “champion” of the European servicing sector, I am also its most harsh critic. I would like to see the servicing sector grow as much as I would like to see current capabili ties improve and that is the sole purpose driving this event. There are four key concepts that I hope every participant will walk away with:
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Welcome to EuropeServicing 2006 London.
EuropeServicing 2006 31st May & 1st June 2006, BAFTA, London
EuroCatalyst, in association with IFR, is proud to present EuropeServicing 2006, “Bridging primary and secondary markets, enabling crossborder lending and protecting asset value in European mortgage and real estate markets”.
the shape and define to is on si is m s t’ a strategic EuroCatalys icing industry at rv se e ag tg or m s European on and capabilitie si vi n, tio va no in asset level and drive ion, servicing and at tr is in m ad e th throughout e chain. management valu rt, Toni ing servicing expe ad le ’s pe ro Eu by d by Hosted 06 is distinguishe 0 2 g in ic v er eS , RMBS, Moss, Europ of European CMBS on si us sc di l ve its high-le perspective. from a servicing s nd bo d re ve co and Europe d critical mass in he ac re s ha g in ic t of Serv the developmen g tin ra le ce ac to y of the and is key and solving man ry st du in e ag tg the mor the sector today. problems facing lling o days of compe tw es ud cl in t en from This year’s ev mercial real estate m co g tin ra pa se content, a full day on each to in g in nd le e ag only residential mortg t programme not en ev e th s, ay w ughout sector. As al tly happening thro en rr cu is t ha w s reflect , it provides or across Europe ct se g in ic rv se e th
that should to drive changes ns tio es gg su ns, d ideas an prove the functio im ly nt ta ns co to king in it. occur in order ities of those wor un rt po op d an s capabilitie issuers, investors s, or at in ig or g in how Featuring the lead interactive, talk-s an in pe ro Eu in s ledge and servicer ide you with know ov pr to pe ho e w ywhere format, you cannot find an at th e nc rie pe ex from any and u cannot gather yo at th ts gh si in else... and other source. sues derstand the is n u to t an w o h re, For those w ustry in the futu d in e th e id u g that will , establish the year ahead r fo s ie g te ra and st set s partnerships es n si u b en th g and stren e, we look ions and debat ss cu is d at re g g enjoy EuropeServicin to u yo g in m co forward wel . 2006 in London rvicing.com www.europese 678 1190 Tel: +31 (0) 35 rocatalyst.com Email: info@eu
Our European CMBS servicing expertise is designed to meet your needs. £514,537,500 United Kingdom
312,805,000 France
1,545,500,000 Germany
£347,758,000 United Kingdom
340,133,400 Italy
Perseus (European Loan Conduit No. 22) plc
Odysseus (European Loan Conduit No. 21) FCC
Immeo Residential Finance plc
European Prime Real Estate No. 1 plc
Nereus (European Loan Conduit No. 20) plc
Commercial Mortgage Backed Notes
Commercial Mortgage Backed Notes
Secured Notes
Credit-Linked Notes
Servicer and Special Servicer
Servicer
Servicer and Special Servicer
Commercial Mortgage Backed Notes
December 2005
December 2005
November 2005
August 2005
September 2004
£581,883,000 United Kingdom
419,350,450 France
302,900,300 Pan-European
£394,198,330 United Kingdom
£813,320,000 United Kingdom
Morpheus (European Loan Conduit No. 19) plc
Leto (European Loan Conduit No. 18) FCC
Iolaus (European Loan Conduit No. 15) plc
Juturna (European Loan Conduit No. 16) plc
Commercial Mortgage Backed Notes
Commercial Mortgage Backed Notes
Commercial Mortgage Backed Notes
Commercial Mortgage Backed Notes
Servicer and Special Servicer
Servicer
Khronos (European Loan Conduit No. 17) S.A. Commercial Mortgage Backed Notes Collateral Manager and Special Collateral Manager
Servicer and Special Servicer
Servicer
August 2004
July 2004
December 2003
September 2003
July 2003
458,030,000 France
£547,581,650 United Kingdom
£524,909,600 United Kingdom
£462,175,000 United Kingdom
£359,440,000 United Kingdom
Dionysus (European Loan Conduit No. 9) FCC
Coronis (European Loan Conduit No. 8) plc
European Loan Conduit No. 5 plc
European Loan Conduit No. 4 plc
European Loan Conduit No. 2 B.V.
Commercial Mortgage Backed Units
Commercial Mortgage Backed Notes
Commercial Mortgage Backed Notes
Commercial Mortgage Backed Notes
Commercial Mortgage Backed Notes
Servicer
Servicer and Special Servicer
Servicer and Special Servicer
Servicer and Special Servicer
Servicer and Special Servicer
June 2002
November 2001
April 2001
September 2000
December 1999
Master Servicer and Master Special Servicer
Servicer and Special Servicer
Selected U.K. and Pan-European Transactions
At Morgan Stanley, we have been servicing European CMBS loans longer than any other firm. We have serviced over 20 billion of commercial mortgage loans throughout Europe since 1998. This extensive involvement has made Morgan Stanley Mortgage Servicing Limited one of the most experienced CMBS servicers in Europe. We’re now rapidly building a third party platform as an expansion of our services. Whatever needs you have, Morgan Stanley is here for you. Please contact: Robert Wojciechowicz, Executive Director +44 20 7677 2311 robert.wojciechowicz@morganstanley.com
Morgan Stanley Mortgage Servicing Limited is rated CPS1– and CSS2– by Fitch Ratings and Above Average by Standard & Poor’s.
Issued by Morgan Stanley & Co. International Limited of 25 Cabot Square, Canary Wharf, London, E14 4QA. Regulated by the FSA. © 2006 Morgan Stanley.
Blackheath Financial
Industry Expertise. Global Resources. A Winning Combination. Global Realty Outsourcing (GRO) and Blackheath Financial have joined forces as part of H-Cube, LLC, a premier global business process outsourcing firm focused on the financial services sector. By integrating the expertise and experience of over 1,000 highly trained mortgage and property professionals, we are now able to offer an unmatched range of outsourced solutions.
Whether it’s commercial servicing, due diligence and underwriting, or residential packaging to securitization, you’ll have access to an expanded portfolio of services designed to satisfy all of your onsite, offsite and offshore mortgage outsourcing needs. By partnering with H-Cube, GRO and Blackheath have the financial resources to build an even more robust and innovative mortgage services platform. As our firms set out to capitalize on this winning combination, one thing remains unchanged: a total commitment to providing our clients with the highest level of service in the industry.
For more information about our expanded range of services, please contact Colette Prior (cprior@gro.com) or Nick Woodcock (nwoodcock@gro.com) at 020 7643 4034 .
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AGENDA DAY 1 (MAY 31):
‘THE WORLD IS NOT ENOUGH’
Servicing for commercial real estate, CMBS, and covered bonds 08:00
COFFEE, REGISTRATION, EXHIBITS OPEN
09:00
INTRODUCTION AND OPENING COMMENTS:
Host: Toni Moss, CEO, EuroCatalyst BV
09:15
SESSION 1:
FROM ‘MODERN TIMES’ TO ‘THE MATRIX’
Changing perspectives on servicing from the “originator’s back office” to the “investor’s front office” and the currency of information
GUEST HOST: Helena Day, Vice President, Morgan Stanley Mortgage Servicing The European servicing sector has been undervalued and slow to develop due to the dominance of on-balance sheet funding and bundled national markets with an inherently negative percepti on of servicing operations as a labour-intensive and industrialized factory for portfolio administration. The drive toward integratio n and internationalization of European markets and the increased optimization of funding efficiencies, risk transfer and economic capital management have resulted in a gradual “unbundling” of national European markets in order to leverage the entire mortgage value chain more efficiently. This session explains why common perceptions of servicing are outdated by shifting the perspective of servicing from yesterday’s “originator back office” to today’s “investor front office”. This perspective more accurately reflects the proactive role that servicers play in managing the informational currency that drives capital market funding. We’ll start by discussing the evolution and growth of CMBS in the U.S. in contrast to the growth of European covered bonds and CMBS; explain the different functions and types of servicers that have evolved; explore how information acts as currency in secondary market transactions and how servicers acquire, process, distribute and protect that information in fulfilling their responsibilities among the various parties in capital market transactions. We will end with some challenging thoughts about why information serves as the industry’s most valuable long-term asset and how much further that information can be leveraged as a strategic asset beyond traditional investor reporting and market transparency. Is it possible to create a repository of aggregated data for European MBS markets to use as a Basel II reference point?
PANEL: Alexander Batchvarov, Head of International Structured Finance Research , Merrill Lynch International Clive Bull, Director, European Commercial Real Estate Group, Deutsche Bank AG Howard Esaki, Executive Director, Morgan Stanley Holly Hammarstrom, Head of ABS Research, European Credit Manage ment Limited 10:00 REFRESHMENT BREAK 10:15
SESSION 2:
‘BAMBI MEETS GODZILLA’
When European privacy, flexibility and innovation meet American transparenc standardization and commoditization . . . how do we engineer a better outco y, me
GUEST HOST: Charles Roberts, Partner, Cadwalader, Wickersham & Taft LLP Transparency is the key to expand our discussion last year on the contrasti ng evolution and pace of the American CMBS vs. European CMBS and commercial real estate finance markets. The commod itization of the US market has achieved the transparency that investors expect; its standardization has enabled servicers to streamline and centralize operations to cut costs and outsource or offshore non-core functions, and the creditor-friendly American regulatory environment allows for an overt, hard-line approach toward borrowers. The complex jurisdictional nature of European markets demands innovation, flexibility and patience across multiple jurisdictions in which standardized regulatio ns, practices and technology are only recently beginning to take shape. Furthermore, the relationship-banking and borrower-friendly regulatory environment throughout Europe requires a customized, relationship-oriented servicing approach toward borrowers that prevents scale or volume-driven approaches.
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DAY 1 (MAY 31):
Servicing for commercial real estate, CMBS, and covered bonds
(continued)
The increasing numbers of American players entering European markets from the outside through Greenfield operations and joint ventures or from within as key personnel in distinctly European initiative s have raised concerns over the “Americanisation” of European real estate markets. While the context for any national market today is a global one that requires all market practices to be differentiated by those that are “local” vs. those that are “worldclass”, it is impossible to benchmark direct parallels between US and European markets. However, as European markets take shape, we now see how some servicers are finding the right balance between adapting best U.S. practices and applying them - where possible - to optimise European operations and the overall development of European markets. Lest Americans feel too over-confident, we’ll take a deeper look into covered bonds and other areas in which Europea ns have a distinct advantage. Should the same impulse strike Europeans, we’ll point out areas in which they are not yet fully exploiting those natural advantages and some fresh ideas that have not yet been considered as the development of loan tranching in Europe takes flight. PANEL: Bill Cohane, Managing Director, Wachovia Securities Scott Goedken, Investment Director – Acquisitions, LNR Partners Europe Michael Gutierrez, Director, Servicer Evaluations, Structured Finance, Standar d & Poor’s Rodney Pelletier, Managing Director, FitchRatings Hans Vrensen, Director, Securitisation Research, Barclays Capital
13:15
SESSION 4
‘BEING THERE’ VS. ‘THE STUNTMAN’
Differing challenges between captive and third-party servicers and their impac t on pan-European market developments
GUEST CO-HOST: Eddie Register, Director, Servicer Ratings , FitchRatings The race that never ends is the pursuit of quality and performance. Europea n CMBS and covered bond administration is traditionally performed by in-house or “captive” servicers with only five third-par ty servicers – so far - actively providing alternative solutions. While we expect the number of third-party providers to increase substantially in the next year (indeed, most likely by the time EuropeServicing 2006 is actually held), already the presence of such limited numbers of third-party providers has dramatically impacted European CMBS market developments on crucial issues including servicer quality, communication, Chinese walls and conflicts of interest. This session focuses on how servicer quality is impacted by ownership and responsibility across different scenarios; how market and deal structure challenges differ between third-party and captive servicers; how those differences are currently managed and how those differences will widen further with more entrants to the sector. The session will raise questions about which entities or market players will mediate, reinforce and regulate the conflicts and considerations that will arise as a result, with a response at the end of the day’s programme from rating agencies and issuers.
PANEL: James Bannister, Senior Manager, Morgan Stanley Mortgage Servicin g Jayne Black, Partner, Real Estate Finance Practice, Katten Muchin Rosenm an Cornish LLP Anne Bridges, Director, European Securitisation Group, Hatfield Philips International Monica Filkova, Vice President, European Debt Capital Markets – Securitis ation, EUROHYPO AG Robbie Hughes, Director, Business Development, Capmark Europe
14:45
SESSION 5
‘HEAVEN CAN WAIT’
Special servicing from loss mitigation on sub-performing loans to the afterli fe of nonperforming loans (NPLs)
GUEST CO-HOST: Glenn Aaronson, Co-head European Asset Management, Morgan Stanley Real Estate Fund, and Head of Acquisitions, Germany and Holland Sometimes quality is considered after the fact. Exceptional circumstances throughout the lifecycle of many loans drive the need for “critical care” units to diagnose and repair, remediate or dispose of loans that cannot be “nursed” back to profitability. Relaxed underwriting at origination, a downturn in the econom ic environment, over-optimism or a dramatic change in socio-political demographics, fraud, bankruptcy, and many other circumstances impact a borrower’s inability to pay, yet the inherent value of the underlying real estate remains. This is when the value of servicing is at its highest as
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special servicers step in to execute strategies and systematic actions to mitigate recurring losses, workout alternative loan solutions or liquidate loans for which there are no further possibilities. In fact, the majority of loans that go into special servicing eventually result in a net loss. Working against those odds requires a well-coordinated and multi-disciplinary team approach of servicing specialists who fundamentally understand the nature of real estate, particularly in markets with volumes of NPLs that exceed the internal capabilities of most banks’ internal work-out facilities. We’ve themed this session “Heaven Can Wait” to reflect the goal of every special servicer and highlight the “afterlife” of NPLs as issuers gear up to securitise acquired NPL portfolios. During the RTC sales in the ‘80s that established the foundation of the U.S. CMBS industry, tough lessons were learned about the correlation between the price paid for distressed assets and special servicing required to optimize exit strategies. Today almost all buyers of European NPLs anticipate exit strategies before making bids on any portfolio and regard special servicing as their most strategic asset. As the most hotly contested NPL acquisitio n markets, Italy and Germany feature the most active special servicers in Europe. This session takes a look at the abundan ce of new players in those markets with a focus on lessons learned in the strategies and timing of loss mitigation efforts in distressed markets and how those lessons can be applied throughout other European markets.
PANEL: Maurizio Coggiola, Deputy Chairman, Capitalia Service JV Matt Grefsheim, Vice President, Morgan Stanley Mortgage Servicing Tom Haverkamp, Member of the Management Board, GFKL Financial Service s AG Jörg Wulfken, Partner, Mayer, Brown, Rowe & Maw LLP Edward Zughaib, Partner, Real Estate Finance Practice, Katten Muchin Rosenman Cornish LLP
16:00:
SESSION 6
‘SENSE AND SENSIBILITY’
Rating agency, issuer and investor perspectives on servicer capabilities, surveillance and operational risk
GUEST HOST: Helena Day, Vice President, Morgan Stanley Mortgage Servicing This session gives “the last word” on servicing to a panel of leading issuers, rating agencies and investors. In building confidence among all parties that appropriate risk measures are in place, we’ll get an outside perspective on the progress of the servicing sector in addressing current market needs and complexities. The session also provides a response and further commentary on issues raised earlier in our session on differing challenges between captive and third-party servicers, and asks provocative questions which have no answers but clearly define the need for enhanced collaboration among all parties involved in advancing the development of European CMBS, covered bonds and commercial real estate. Specific discussion topics include: Are servicers fairly balancing the interests of all parties in transactions, and what can they do to further improve that balance? How will the combination of Basel II compliance and the massive consolid ation of the European banking sector impact originators, issuers and servicers over the near term? Is there sufficient servicing capacity in Europe to manage the increasing numbers of conduits launching? Regarding the value of servicer ratings, as the complexity of European CMBS transactions increase and covered bonds now include MBS in their cover pools when can we expect ratings to become mandatory for all servicers involved in any public issuance – and who should enforce that requirement? What should be the minimum tenure for servicers to be operating successf ully in a market before receiving a rating? Are current servicer ratings too broad to be effective in differentiating servicer quality? How will rating agencies or issuers look upon secondary outsourcing by servicers themselves? Under what circumstances would issuers be comfortable utilizing, and rating agencies accepting servicer advances in place of liquidity facilities? Considering the absence of back-up servicing in European CMBS and a move toward advancing, what should the minimum capital requirement be for all third-party servicers? PANEL: Faten Bizzari, Senior Credit Manager, HBOS Treasury Services Marie-Noelle Brisson, Director, Standard & Poor’s Giovanni Pini, Credit Analyst, European Credit Management Edward Register, Director, Servicer Ratings, FitchRatings 17:00 EUROPESERVICING AWARDS AND NETWORKING COCKTA IL
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DAY 2 (1 JUNE):
‘TOMORROW NEVER DIES’
MORTGAGE PROCESSING, ADMINISTRATION AND SERVICING FOR RESIDENTIA L MORTGAGE LOANS AND RMBS 07:45
COFFEE, REGISTRATION, EXHIBITS OPEN
08:30
OPENING COMMENTS AND INTRODUCTION PRESENTATION
‘CONFESSIONS OF A DANGEROUS MIND’ Optimising servicing considerations throughout the capital structure from an RMBS investor’
PRESENTER: Dominic Swan, Head of Structured Investments , HSBC This introductory presentation puts the day into context by looking at the investor’s position in the capital structure and how it affects their servicing considerations, and what RMBS investors look for the most and what they fear the worst from servicers on transactions.
s perspective
09:00
SESSION 1
‘LOST IN TRANSLATION’
The economics of outsourcing and ethics of offshoring in European mortgage markets
In European mortgage lending, outsourcing continues to grow across specific, “non-core” activities. However, despite the use of third parties as a means to reduce costs, increase flexibility, and streamlin e operations, most European institutions remain reluctant to outsource their entire administration process, and relatively few third-party providers have successfully picked up substantial numbers of clients in what would appear to be fertile markets such as the UK. Are current levels of service, price, and capabilities strong enough to validate the economics promised by third-party administration? Or are other factors, such as risk considerations and the ownership structure of existing third-party providers, presenting a competitive barrier to outsourcing considerations in home markets? Many of the same institutions which are reluctant to outsource at home actively arbitrage high domestic labour costs against lower costs elsewher e, taking advantage of the comparative benefits of offshoring. (At a recent U.S. servicing conference it was estimate d that offshoring by U.S. seller/servicers could reach as high as 80% in the near future. ) In the labour-friendly markets of Europe, lenders must weigh the value of outsourc ing and offshoring against the social turmoil and political strife raised by the inevitable loss of jobs (in addition to operational, reputational, legal and country risks). Henry Ford famously said that he paid his workers well because he wanted them to buy his cars. Coming from the founder of the first company to apply assembly line techniques to the mass production of affordable automobiles, the deception of his statement took decades to uncover. On the other hand, if we apply that logic to European mortgage industry growth we can’t help but ask, “Are workers being paid enough to be able to afford a mortgage? The title of this session, “the economics of outsourcing and ethics of offshorin g” outlines both the dilemma and the opportunities facing European mortgage market developments. Our panel evenly balances the range and complexity of perspectives, persuasion and possibilities to balance economics and ethics in an industry that has been slow to react to globalization
PANEL: Larry Banda, Head of Mortgages, Nationwide Building Society Jean-Louis Bravard, Managing Director, Global Financial Services, EDS Steve Haggerty, Group Commercial Director, Skipton Building Society Nick Laird, Founder and CEO, Global Realty Outsourcing RECOMMENDED READING: “Smarter Outsourcing, an Executive Guide to understanding , planning and exploiting successful outsourcing relationships” by Jean-Louis Bravard and Robert Morgan, published by FT Prentice Hall
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SESSION 2
‘BRAZIL’
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Bringing transparency and improved reporting to the increasingly complex world of RMBS transactions
A rise in the number of accounting errors in the European RMBS market, as noted in a recent special report by FitchRatings, has placed the spotlight on back-office problems involving documentation, the need for standarisation, the growing complexity of deals, and the overall lack of transparency. Arguably, these errors are still not a threat to investors, but the increase in errors has been significant enough to warrant reporting in the daily press. This session looks at the complexities of relationships between originators, servicers, and trustees, and highlights issues regarding the collection and distribution of information across the back office. We also focus on efforts by the Europea n Securitisation Forum to introduce a set of standardised reporting fields and definitions for the RMBS market (similar to the efforts in the CMBS market by the CMSA) to harmonise the information available in RMBS transactions and thereby promote transparency in the secondary market. Moreover, should specific back-office functions currently held in-house by the majority of issuers be unbundled to an experienced third party?
PANEL: Rick Watson, Managing Director, European Securitisation Forum Ron Roark, Chairman, Crown Mortgage Management Robbie Sargent, Associate Director, FitchRatings Ian Stewart, Head of Securitisation and Structured Analysis, HBOS Treasur y Services RECOMMENDED READING: “Calculation Errors in European Structured Finance” FitchRatings RMBS/Europe Special Report. 18 April 2006 11:15 REFRESHMENT BREAK 11:30
SESSION 3
‘AROUND THE WORLD (OR EUROPE) IN 80 (OR 90) DAYS (OR MINUTE
S)’
Cross-border lending and new market entry - an overview of options for thirdparty administration in key European RMBS markets (and the lack thereof)
This session provides an overview of “best practices” for residential servicing and an inventory of third-party options to reduce the cost of new market and cross-border entry across Europe. Consider ing the crucial importance of third-party administration to cross-border lending, this session looks at how cultural, commer cial, and regulatory attitudes have facilitated the development of the third-party sector in certain markets; have slowed development in others and have rendered the sector virtually non-existent, most notably in Spain. We’ll also discuss the prospects for change through the expansion of cross-border servicing; take a look at how bank consolidation will impact third-party servicing and profile the leading players across European markets.
NETHERLANDS 11:30 The Dutch market’s early adoption of securitisation in the mid ‘90s, compared to the rest of Continental European countries, has led to some of the most complex and unique mortgage products in Europe. The Dutch market is also renowned for embracing third-party mortgage administration as early as 1996. Thus it should be no surprise that, despite being headquarters for three of the world’s largest banks in a small country of 17 million people, the Dutch market was among the first to experience the post-Euro wave of foreign market entrants. We see the ability to outsource the administrative process to third parties as one of the most important drivers for entry into any market. Clearly the presence of three outsourcing options led (in order of size) by STATER, Quion and most recently, Ordina says much about the commercial dynamics of the Dutch market. This session takes a look at how the Dutch experience will spread across other European countries. PANEL: Peter Besuijen, Managing Director, Quion Group BV Ryszard Kruzel, Director XXL, Stater NV Rob van den Berg, Director, GMAC-RFC Nederland Tom van der Geest, Director, Hypsotech Management Consultancy BV
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GERMANY 12:00 The German market has been relatively slow to embrace third-par ty servicing, primarily due to the three pillar banking system and the related preference for shared utilities among banking group sectors. Despite the early presence of Hypotheken-Management (now owned by KreditWerk) in 1998 and the cross-border entry of STATER in 1999, the implosion of the German mortgage banks and explosion of NPLs has led to a market dominated by special servicing ventures in the past 3 years. The experience gained by workouts on NPL loans has created a natural position for special servicers gearing up for the expansion and entrance of non-conforming and sub-prime lenders. This session looks at how Europe’s largest mortgage market views the importance of servicing today, and how new ventures are lining up to capitalise on the changes to come. PANEL: Clarence Dixon, Managing Director – Continental Europe, Crown Mortgag e Management Christian Fein, Head of Europace International, Hypoport AG Gerd Koidl, Board of Directors, HSH Nordbank Jörgen Louw-Pedersen, Consultant
SPAIN 12:30 The first European country to utilise both covered bonds and RMBS in volumes that now exceed the UK, we’re bullish on Spain (pun intended). So bullish, in fact, that we launched our signature event in Madrid in 2002 to point out why that significance would have such a profound impact on European and global mortgage markets moving forward. In case any of you missed it, we’re going back to Madrid for our 5 year anniversary this October to prove another point (and you’ll have to be there to see it). In the meantime, we’ll give you a piece of the puzzle. Today, we see the most striking feature of the Spanish market as being the lack of complete thirdparty servicing alternatives. Although parts of the value chain can be outsourc ed in Spain, to date no solution exists for cross-border lenders to outsource their entire back-office. We know how many lenders want to get into the Spanish market, but what has been holding them back? And why is the cost of entry so unusually high? We’ll let you make your own decisions upon hearing from key market participants.
PANEL: Eric Klesta, COO, International and Corporate Development, Unión de Crédito s Inmobiliarios Baralides Alberdi, Consultant, Associate Partner, EuroCatalyst BV Juan Güell, First Vice President, Cibergestión
13:45
SESSION 4
‘I CAN GET IT FOR YOU WHOLESALE’
Servicing considerations for whole loan sales and trades
As European funding alternatives continue to diversify and balance sheet re-engin eering moves into high-gear, whole loan sales are an effective funding alternative, allowing lenders to accelerate new business and achieve lending targets through the bulk acquisition of whole loan portfolios. Loan sales provide a more cost-effective way for lenders to increase assets and diversify their overall book while reducing fixed costs or strategies that conflict with core operations and capabilities. For intermediaries, whole loan sales provide a wider range and consistent source of products. Finally, custome rs benefit from greater choice and more competitive and transparent products, creating a win/win solution across the value chain. In the past two years investment banks have become large portfolio buyers as product to securitise through their own conduits, increasing the premiums paid for portfolios in a robust seller’s market. It’s a terrific “blue sky” scenario across Europe with one small problem holding back the trend – the lack of third-party servicers for portfolio buyers. This session features top buyers, sellers and current servicers leading the trend that will fundamentally alter the European lending sector in the next decade. In particular, we’ll be discussing: Motivation for buying and selling with a discussion of key transactions across Europe Servicing transfers of new portfolios Improvements in data sophistication and cost including credit scoring and automated property valuation models (AVMs) Changes in regulation that simplifies the documentation required for portfolio sales Current efforts to increase portfolio transparency, standardize sale contract s and reduce transaction time PANEL: Craig Beresford, Director of Asset Sales - Capital Markets, GMAC-RFC UK Ltd. Geertjan Jellema, Director, Stater Mortgage Investment Services Gordon Jolly, Managing Director, Amber Homeloans Limited Brian Kane, Managing Director, Structured Finance Ratings Services, Standar d & Poor’s Patrick Currie, Co-Founder and Managing Director, Hometrack Data System s
195, PICCADILLY, LON
OPESERVICING.COM 14:45
REFRESHMENT BREAK
15:00
SESSION 5
‘GREAT EXPECTATIONS’
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As non-conforming/sub-prime lending expands across Europe, are special servici ng capabilities
growing along with it? Definitions of “non-conforming” and “sub-prime lending” vary as greatly througho ut Europe as the number of languages spoken, and despite the possible repetition are often placed together as we have done in title of this session to refer to anything that falls outside of the category of “prime”. We assume by now that everyone has read the April, 2005 report on “Risk and Funding in European Residential Mortgages,” in which Mercer Oliver Wyman convincingly identifies a 15% market expansion of untapped opportunity equivalent to €500 billion of lending in Europe. Before you run off to capitalize on it, please read further. Outside of the UK where the sub-prime market is the most evolved (if not saturated), the greatest opportunities are found in Germany, Italy, France and Spain. On the Continent, if you were to describe your own working definition of a non-conforming loan to most lenders, they will often tell you that whatever you have described “happens” in their market although not as frequently, but due to the sensitive nature of relations hip banking it is not publicly marketed as such. Occupancy status (Buy-to-Let), how high lenders go on LTVs, how much documentation is provided for underwriting, and borrowers with impaired (or non-existent) credit histories all fall outside of the range of “prime” mortgages and onto the widening non-conforming/sub-prime lending spectrum. The best way to understand whether or not a mortgage is consider ed a higher risk by the originating institution is to evaluate how those loans are currently serviced. Why? Because we assume by now that everyone understands the direct correlation between high risk and/or high LTV loans and default frequencies. Or do they? This session explains how special servicing is distinct from other servicing roles and what skill sets and strategies are required to establish special servicing departm ents and/or separate operations; why special servicing is crucial to the expansion of non-conforming/sub-prime lending throughout Europe, and hear from the leading players (both originators and third parties) on servicing considerations in product development and proactive servicing actions that begin much earlier in the value chain, once loans are funded. In short, where the Mercer Oliver Wyman report identified “great expectations” for the expansion of high-risk lending, this session reminds everyone of the equally “great expectations” placed upon the servicing of the higher-risk sector.
PANEL: Paul Fenn, Development Director, Homeloan Management Limited Hoesli Labhart, Director, Principal Finance, Citigroup Diane Pendley, Managing Director, FitchRatings Jodi van Breda, AVP/Analyst, Moody’s Investors Service
16:00:
SESSION 6:
‘CRASH’
When High Street meets Wall Street in The City, which way do you turn?
This session moves beyond last year’s lively discussion, “Fighting in the food chain and survival of the fittest”, and zooms in on the Darwinist transformation playing out along the front-end of the mortgage value chain across major European markets as a battle over mortgage distribution. With more than 10 formidable new lenders entering the nonconforming sector over a short period of time, the UK market is the best place to watch the drama unfold. The discussion will provide ideas and inspiration for some and a warning for others, but no one in the European mortgage industry remains untouched by its implicati ons. With the churn-driven 10-year prime market coming to an end, mainstream lenders face a struggle between generating profit from their books vs. regulatory pressure to price for risk. Enter the investment bank conduits and principal finance. The same regulato ry hurdles that many anticipated to act as barriers to entry have instead provided the market stability that attracts investors. The result is a clash between the relationship-driven, operationally expensive “High Street” approach to mortgages vs. the operationally lean, commod itization-driven conduit lending model. The ultimate showdown is the battle over distribution for those closest to the largest volumes of customers. The nature of nonconforming lending demands increased labour and documentation in the mortgage fulfilment process, a need that has risen to the growth of packagers who specialize in collecting and organising information faster, cheaper and more efficiently. Morgan Stanley’s recent acquisition of packager Advantage Home Loans and the tieup between Investec and Infinity Mortgages to create Unity Homeloans (lending arm of the Professional Mortgage Packager’s Alliance) shows exactly where battle lines are being drawn. With all of the new competition entering the lending market, which parties will be making the credit decisions, process and administer the volume, collect the payments, provide loss mitigation and arrears management? Stay tuned for a provocative session to see who stands to benefit most from the fallout, how they intend to pursue it and how the third-party sector will change as a result.
PANEL: Rob Bier, Chairman, Sparck Hypotheken Michael Bolton, Chief Executive, MBAC Consulting Bill Dudgeon, Managing Director, db Mortgages David Grant, Managing Director, Homeloan Management Limited John Maltby, Chief Executive, Kensington Group
NDON
ES 20 06
31 MA
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We are pleased to sponsor this year’s EuropeServicing Conference and look forward to another record year. William Stanley Managing Director
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Director of Securitisation
Hatfield Philips International 34th Floor 25 Canada Square Canary Wharf London E14 5LB Tel: +44 (0)20 7071 6100
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The European securitisation group at Mayer, Brown, Rowe & Maw LLP is considered to be a powerful, heavy-hitting, technically excellent team who regularly represent issuers, underwriters and placement agents, investors, trustees, servicers, credit and liquidity enhancers, multi-seller conduits and rating agencies, and is continuously active in securitisation in North America, Latin America, Europe, and Asia. The team has experience in almost all types of assets, including many exotic asset-classes, such as operating leases, future export receivables and charged-off consumer loans, and various types of CLOs and CBOs.
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