JUNE 2014

Andrew Freeley has joined Specialist Mortgage Services (SMS) as managing director.

HML Ireland managing director David Kelly has appeared on RTE Morning Edition to talk about tracker mortgage repayments.

The European Central Bank has cut the base rate to 0.15%.

HML NewsAndrew Freeley has joined Specialist Mortgage Services (SMS) as managing director.

HML has appointed Andrew Freeley as managing director of Specialist Mortgages Services (SMS), a HML subsidiary. Freeley has joined SMS at an exciting time for the company. SMS provides regulated mortgage advice in the post-Mortgage Market Review (MMR) world, legal title management, mortgage shortfall debt recovery and market-leading advanced analytics services. He brings with him 15 years of experience in the financial services sector, including head of strategy and planning for UKAR and strategy director for Skandia Investment Group. Freeley started his career as a management consultant for Ernst & Young, delivering major strategic change programmes for financial services clients. “We are very excited by the growth potential of SMS, which adds a new dynamic and suite of capabilities to HML’s business in both the UK and Ireland. Since the launch of the MMR, we have experienced a high volume of calls from customers who want mortgage advice, demonstrating the importance of regulated advice in the post-MMR world. SMS efficiently delivers this for our clients and ensures customers receive high-quality advice to help them achieve appropriate outcomes in a fair, transparent and well-governed manner. “Our market-leading advanced analytics capability supports HML’s service to clients and also provides expertise to a range of other clients requiring analytics to help drive customer strategies and collections effectiveness, an example of which is our focus on recovering mortgage shortfall debt.

“With legal title management, SMS, coupled with HML’s expertise in mortgage servicing, has the capability to provide an end-to-end mortgage management solution for clients wishing to invest in mortgage portfolios. Over the coming months, SMS will play an increasingly important role in HML, delivering diversification and growth.” Andrew Jones, chief executive officer at HML, commented: “I am delighted to welcome Andrew as managing director of SMS. His wealth of experience in the financial services sector is a great asset and will enable us to further develop SMS, both in the UK and Ireland. There is certainly a lot for lenders and mortgage portfolio investors to consider at the moment, and HML together with SMS have the experience and track record of delivery to support clients and their customers through this period and beyond.”

Andrew Freeley, managing director of SMS 

HML News

HML has kick-started the debate in Ireland regarding tracker mortgages.

Despite the European Central Bank base rate cut to 0.15% - which could bring the average monthly mortgage repayment down by around €15 a month - Mr Kelly has urged mortgage borrowers to keep up the same level of repayments in order to help chip away at the capital they owe.

He described now as a "window of opportunity" for mortgage borrowers to pay down their mortgage, as the low base rate "will not stay low forever".

Mr Kelly’s comments were reported widely in various Irish newspapers, including the Irish Independent and he was also interviewed on RTE Morning Edition.

You can watch this video by playing the presentation as a Slideshow or, alternatively, by clicking here.

Ireland shouldn’t dwell on the past in order to move forward.

David Kelly made the comments following the Federation of International Banks in Ireland (FIBI) annual conference, for which HML was a sponsor.

Key speakers included the Taoiseach Enda Kenny, Neil Ryan from the Department of Finance, Patrick Brady from the Central Bank of Ireland and Santiago Fernandez de Lis from Spanish bank BBVA.

The event focused on three main topics:

1) The impact of the Single Supervisory Mechanism (SSM) on Ireland2) Digital developments in the banking sector3) How Ireland is coming out of a trough

Mr Kelly said: “With a banking enquiry planned for later in the year, there will no doubt be a firm focus on the previous mistakes of the banking sector. However, we need to remember the progress the country has made over the past few months and avoid dwelling on the past. Sentiment towards banks may remain negative for some time to come, but we have to ensure positives aren’t ignored, such as the recent news about some banks returning to profit and lower arrears levels.”

Mr Kelly also stressed: “The domestic and international banking sectors have a strong role to play in contributing to Ireland’s recovery. We should not forget the lessons of the past, but we should focus on how best we can apply these lessons in the future.” 

You can read Mr Kelly’s article in full here.

HML Ireland Update

Date reflects what the statistic was during that period, rather than when the statistic was published* Figure has since been revised

Consumer Price Index (Central Statistics Office)

MAY ‘14

0.4%

APRIL ‘14

0.3%

MARCH ’14

0.2%

European Central Bank (ECB) Base Rate

JUNE ‘14

0.15%

MAY ‘14

0.25%

APRIL ‘14

0.25%

Unemployment Rate (Central Statistics Office)

MAY ‘14

11.8%

APRIL ‘14

11.8%*

MARCH ’14

11.8%

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+

Q1 ’14

132,217

93,106

39,361

31,048

Q4 ’13

136,564

96,474

39,250

30,706

Q3 ’13

141,520

99,189

40,426

31,227

Home Repossessions (CBI)

PDH

BTL

Q1 ‘14

1,116

568

Q4 ‘13

1,014

503

Q3 ‘13

1,050

516

Industry StatisticsConsumer Price IndexThe CPI in May was 0.4% higher than the same month in 2013. It increased by 0.1% on April, with notable upward pressures coming from the education (4.5%), alcoholic beverages and tobacco (3.4%) and miscellaneous goods and services (4%) sectors.

This was partially offset by declines in communications (-4.7%) and clothing and footwear (-3.5%).

ECB Interest RateThe ECB base rate has been cut to

0.15%. Mario Draghi, president of the ECB, said: “Although labour markets have shown some further signs of improvement, unemployment remains high in the euro area and, overall, unutilised capacity continues to be sizeable.”

Unemployment RateThe unemployment rate remained the same between April and May, standing at 11.8%. This represents 391,800 people out of work. In the same month in 2013, the unemployment rate stood at 13.6%.

House PricesThe national average house price in Ireland stood at €187,736 in Q1 2014, a 0.7% decline on the previous quarter, according to MyHome.ie’s analysis of asking prices. 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 of 3.7% on an annual basis.

ArrearsPrincipal Dwelling Houses (PDH)

The number of PDH mortgage accounts in arrears declined by 3.2% between Q4 2013 and Q1 2014. Out of the total mortgage accounts, 17.3% were in arrears, representing a total 132,217.

There was a fall of 3,361 of the number of accounts in arrears of more than 90 days, the Central Bank of Ireland said.

However, accounts in arrears of more than 720 days increased to 35,314, representing almost 68% of outstanding arrears on PDHs and balances of €7.4 billion.

Buy-to-let (BTL)

The number of BTL mortgage accounts in arrears increased during Q1 2014 to 39,361, representing 27.2% of accounts. However, there was also an increase in the number of those in arrears of more than 720 days, representing 9.2% of accounts with balances of €4.2 billion.

Home RepossessionsAt the end of Q1 2014, there were 1,116 PDHs and 568 BTLs in lenders’ possession. Of the PDHs, 281 were taken into possession during the quarter, 54 of which were the result of a court order, while 227 were abandoned or voluntarily surrendered.

Top News StoriesPermanent TSB has appointed Morgan Stanley to sell approximately €2.6 billion of assets.The Irish lender is looking to sell its commercial real estate and subprime residential mortgage loan books.

PTSB’s subprime unit is Springboard Mortgages, which stopped writing business in 2009.

PTSB chief executive officer Jeremy Masding is attempting to refine operations in order to prove the bank is viable, after it required a €4 billion state rescue package.

The latest mortgage restructure figures have been released.At the end of April 2014, there were 65,698 permanent mortgage restructures, a 3,633 rise on the end of Q1 2014.

The Department of Finance figures also showed that the number of split mortgages has increased, with 11,157 in place at the end of April.

Other permanent restructures for accounts in more than 90 days of arrears include a term extension (14,829), interest-only (1,135) and arrears capitalisation (19,329). Temporary restructures include deferred interest schemes (110) and interest-only (9,016).

KBC Bank has denied three-month insolvency deals on mortgages.

The Irish Mortgage Holders Organisation (IMHO) said it had reached an agreement with AIB and KBC Bank to allow insolvent borrowers to be cleared of their debts within three months if they surrender their property, the Irish Times reported.

However, the bank has told the newspaper that this is not the case. Personal Insolvency Arrangements can, at present, last for up to six years.

The newspaper contacted IMHO director David Hall for further comment. He said there was “no written agreement”, but that the bank had been “agreeable to facilitate short insolvency arrangements” at a recent meeting.

The National Asset Management Agency (NAMA) has completed its largest loan transaction.The Portfolio Eagle loan sale transaction has been concluded with Cerberus Capital Management. The deal relates to loans secured on assets where the underlying properties are owned by debtors based in Northern Ireland.

NAMA recently announced profit of €211 million for 2013, with asset sales completed to date totalling €14.1bn.

Top News Stories

AIB will repay its €20.8 billion bailout funds, its chairman said at its annual general meeting.David Hodgkinson said the money will be paid back “over time”, and that its plans are “realistic”.

The Irish Independent reported Ciaran Callaghan, a banking analyst at Merrion, as commenting: “Given the existing favourable market backdrop coupled with the demand for Irish assets, we believe an accelerated disposal strategy would be most desirable, with the bank likely to be in a strong position to approach investors post the [full-year] 2014 results early next year.”

The announcement follows the recent news that AIB returned to profit in Q1 2014, the first time since it was bailed out.

It has also been revealed that David Duffy, the chief executive of AIB, has signed a permanent contract.

Bank of Ireland’s Wilbur Ross has resigned as director and sold his shares in the bank.Mr Ross and “certain funds connected with him” has sold approximately 1.8 billion units of shares.

Bank of Ireland Group chairman Archie Kane commented: “Wilbur was instrumental in the success of the 2011 capital raising and, throughout his tenure, we have benefited greatly from his insights.”

Standard and Poor’s (S&P) has upgraded the Irish sovereign debt rating to A-.The rating agency has become the first major one of its kind to provide an A rating to Irish sovereign debt.

It upgraded the rating from BBB+ to A- with a positive outlook.

S&P said: “The upgrade reflects our view of the brightening prospects for Ireland’s domestic economy, which we expect to underpin further improvements in the government’s financial profile, capital markets access and financial system asset quality.”

Meanwhile, minister for finance Michael Noonan commented: “I am particularly pleased that this upgrade is being driven by S&P’s view on the improved prospects for the domestic economy. This is a view I share and with thousands of jobs being created each month, strong exchequer performance and with positive high-frequency indicators, I am confident that we are moving in the right direction.”

14,000 job applications have been received for SSM, the ECB has revealed.Danièle Nouy, chair of the supervisory board of the ECB, said 14,000 applications have been received for the 800 supervisors that are required to manage the SSM. The recruitment campaign should be completed by the end of summer.

Ms Nouy added: “This is just a snapshot and I guess you can imagine the challenges we are currently facing to get our “start-up” fully running.”