Fitch Ratings says that it has noted Abbey’s decision to outsource elements of its residential mortgage collections to Westcot Credit and it will continue to monitor the impact of this arrangement on the Holmes Master Trust, Abbey’s securitising vehicle.
Fitch’s European Structured Finance team director Robbie Sargent says: “It is not necessarily a surprise that a large prime UK mortgage lender is outsourcing some of its collections activity in the current market conditions.
“However, Westcot’s staff have a relative lack of experience of the sector. Fitch understands that Abbey has implemented a strict monitoring regime, and Westcot’s previous experience collecting on the Abbey unsecured portfolio, does provide a degree of comfort.”
Westcot will manage 25 per cent of Abbey’s new mortgage defaults with effect from April 6 2009. The collections agency will be responsible for debt recovery and customer rehabilitation, but all mortgage loans will revert back to Abbey when they have reached 90 days in arrears, as Westcot staff will complete no litigation duties themselves.
Fitch says Westcot has limited experience of collecting on residential mortgages. However it does admit that Abbey has provided specific training and has had two members of staff located on site at Westcot in the lead up to the arrangement going live. Abbey has further mitigated Fitch’s concerns by only giving Westcot 10 per cent of new arrears cases in the initial stages of the outsourcing contract, before ramping up to a planned 25 per cent in the future.
Fitch’s European Structured Finance team associate director Peter Dossett says: “It is too early to assess the impact of this change on Holmes. Given the heightened importance of servicing in the current environment and the scale of Westcot’s involvement, Fitch will closely monitor the practical impact of the arrangement.”
An Abbey spokesperson says: “Abbey has appointed Wescot to undertake some of its collection activity on its mortgage book. Abbey has done this to build a flexible and scalable operating model suited to the current economic conditions.
“Abbey has also trained Wescot’s staff to the same market leading level as its own collection team and installed a rigorous monitoring process to ensure Wescot meets Abbey’s high standards in this area.”