Is the mortgage market witnessing the first green shoots of recovery? The background music is definitely positive. The recent Budget was the first one in seven years not to include new austerity measures. Fitch recently reported that early-stage mortgage arrears have dropped below two per cent for the first time in three-and-a-half years.
Unemployment is also coming down, with the rate for September standing at 11.1 per cent. In the same month in 2013, this figure was a much higher 12.6 per cent. With Ireland’s leading banks also returning profits in their latest financial results, sentiment is certainly improving.

One area that this is evident is within the asset trading solutions market. A recent report by PwC noted that over €27 billion of asset trading has already taken place during 2014, with many of the asset purchasers coming to the fore from the US, such as CarVal, Lone Star and Apollo. They have undertaken deals quickly, reflecting the robust appetite within the market.

Private equity firms are fast entering the traditional lender market; the Investec sale of Start to Lone Star and the sale of Springboard to Mars Capital are two significant transactions that have taken place recently.

However, successful asset trading is not just about finding the right portfolio at the right price. There are many complex components to asset trading that play a central role if investors are to enjoy true value from the asset trade. So what are the three key steps which need to be taken?

1. Analysing a portfolio
A portfolio needs to be analysed for risk, as well as forecasting its performance, arrears levels and cash-flows. This is where advanced analytics are essential for creating a solid foundation for the subsequent steps.

2. Servicing review, including due diligence
As well as analysing the portfolio, a servicing review can also help investors make the right strategic decisions. A loan-level risk assessment of a portfolio, tailored to an investor’s requirements, can further bolster deal confidence.

3. Portfolio modelling
Portfolio modelling is another important step in the process of asset trading, with advanced analytics once again playing a key role. Using a partner that can develop statistical models enables investors to predict mortgage redemption, future losses and the profitability of accounts.

Portfolio valuation and pricing
Once these steps have been taken, investors are in a strong position to have their portfolio valued and priced. Indeed, as well as an increasing number of asset purchasers looking to acquire mortgage portfolios, there are also sellers who believe now is the right time to dispose of their assets as a result of the more attractive sale prices. This has been quite evident in Ireland, which has led the way in Europe for asset trading.

Indeed, at the International Corporate Restructuring Summit in Dublin in September, Fabrizio Grena, executive director of European Special Situations Group at Goldman Sachs said 30 per cent of asset trading activity in Europe has taken place in Ireland since the economic collapse.

What next after onboarding?
We have seen that the asset traders involved with recent deals in Ireland have committed themselves to the Code of Conduct on Mortgage Arrears (CCMA), so it’s essential that the mortgage servicing partner they choose places appropriate customer outcomes at the heart of everything they do. A partner should have a thorough understanding of the difficulties that some borrowers in Ireland face and be highly experienced at managing borrowers in arrears, drawing upon comprehensive knowledge of the CCMA, Mortgage Arrears Resolution Process and Standard Financial Statements.

When the Department of Finance in Ireland releases the results of its consultation into the sale of loan books, it will be clear as to where borrowers, the
market and the wider industry stand on the matter.

There is certainly plenty for investors to consider when searching for the right mortgage portfolio deal in Ireland, from ensuring appropriate outcomes for consumers and reducing arrears levels, to finding a profitable portfolio and migrating the assets. Partnering with a proven third-party asset trading solutions provider can help investors quickly overcome these hurdles in order to enjoy a successful and profitable deal.