Mark Davies, md, BCMGlobal Mortgage Services, answers SCI's questions

Q: How and when did BCMGlobal become involved in the securitisation market?
A: BCMGlobal services £3.2bn of securitised loans, totalling 23,000 borrowers, across circa 25 portfolios and 10 securitisation programmes. We act as a standby servicer for £7.1bn of securitised loans for 17 clients across 47 transactions. Our loan portfolios are domiciled and secured in the UK and Ireland.

The company has operated as a third-party loan servicer since the mid-1990s and as a servicer and standby servicer for securitisation and structured finance deals for some 25 years. The firm was originally owned by Guardian Royal Exchange, but it was sold to Crown Northcorp in 1999 and then to Forum Partners.

In 2014, it was acquired by Capita and renamed Capita Mortgage Servicing. In 2017, Link Group ASI purchased the business as part of its acquisition of Capita Asset Services and the firm was again renamed BCMGlobal in 2019.

We service the whole spectrum of mortgage loans and our clients are both originating lenders and closed-book investors.

Q: Can you explain what BCMGlobal’s ‘creator to trader’ model is?
A: The creator to trader model supports new lenders or originators of new loans and mortgages as they launch to market, mature and extend their product base and expand their market reach. We then work with them to support their funding models as they grow, refinance, trade or securitise the loan portfolios. We can help new lenders with limited experience of servicing get to market at a speed they might not achieve independently.

The main driver behind establishing this model was a recognition of the need to support the growing number of new lenders entering the market, as well as funders/investors looking to finance new players/entrants and who seek participants with experience, pedigree and track record in the sector to minimise their risk and exposure and to support nascent businesses. This is bolstered by our deep experience of servicing and banking operations, capital markets reporting requirements and sector-wide stakeholder understanding - from legal contracts to portfolio due diligence and rating agency requirements.

Over the last five years, we have worked with and launched 10 new players to market, supporting their operating models, funder due diligence, rating agency and investor roadshows. Ultimately, we are seen by our clients’ funders as a risk mitigant for operating, conduct and technology risk throughout the mortgage lifecycle.

Q: What does BCMGlobal’s dynamic risk management service entail?
A: All clients have an individually tailored Client Servicing Manual, which defines servicing activities, delegated authorities and responsibilities that can be amended and updated, outside of the servicing contract as market conditions or loan performance and regulations change. Portfolio buy-to-let loans, for example, are given the same proactive management as commercial property loans and performance-managed via a ‘watch list’ operating model. This allows any issues to be documented, loans to be monitored and reported specifically to minimise decision-making delays and thereby optimise recoveries.

Q: What role does data play in the service you provide your clients?
A: Granular, loan-level data is provided to all clients for the purposes of: risk management; performance modelling, including loss-given default and probability of default; cashflow forecasting; due diligence; credit reference agency and regulatory reporting; central bank reporting; and ESMA file submissions. Analytic information - while always part of risk modelling - will undoubtably continue to support collection and recovery strategies and to help identify and monitor hardship, vulnerability and forbearance for either servicing or regulatory purposes.

Q: How did BCMGlobal help clients manage Covid-related payment holidays/forbearance in their portfolios?
A: Responding to changing requirements and advice/guidance required multi-disciplined teams to collaborate to design, define and document new processes, letters and all agents’ scripts. Change and IT teams were required to specify, develop, test and launch new software in a period of weeks when ordinarily the process would take months. Additionally, specific reports for internal performance and activity monitoring were implemented for clients and regulatory purposes.

Q: Which challenges has Libor transition posed to your clients and how have they been overcome?
A: Generally, delayed decisions and a lack of clarity in guidance and implementation by regulators resulted in undue time pressures and efforts to inform and communicate with borrowers. For structured transactions, the legal and approval processes required slowed the decision-making process and placed operational pressure with respect to communicating and implementing new, alternative reference rates. As such, focusing on treating customers fairly and giving due notice for regulated borrowers was critical.

Q: In which ways does BCMGlobal differentiate itself?
A: We represent and balance the regulatory brand of our clients with their regulatory responsibility to their borrowers. We are the custodian of the interests for all the stakeholders in the loans we service.

Indeed, balancing the client need with the borrower outcome is a critical skill and vital operational responsibility. For our clients, their borrowers and our staff, we aim to do the right things, the right way, for the right reasons.

Q: What is your outlook for the securitisation servicing sector?
A: Depending on global market dynamics, the potential for refinancing existing funding structures and warehouse lines will mean potential changes to servicing opportunities.

Current inflation and rising interest rates have not been experienced by a generation of originators, investment bankers and borrowers. Rising interest rates represent an opportunity for higher returns for investors, but are a threat to the financial performance of transactions. Against this backdrop, collections and arrears management skills could potentially come to the fore but in a regulatory climate not previously experienced.

It is possible that some of these headwinds may be offset by the wage increases of home-owners and the increased savings some may have amassed during the pandemic. While other investment returns are impacted by inflation and market tensions, property remains a solid investment class and UK house prices - despite the comments of many - have been remarkably resilient and appear to be robust.

Finally, the UK FCA’s borrowers in financial difficulty (BiFD) project - combined with possible affordability issues - will undoubtably have implications for servicers and stakeholders alike, as processes, data collection and reporting will be required to change.

Corinne Smith