U.K. mortgage lender Abbey National said it plans to outsource elements of its residential mortgage collections to Westcot Credit Services.
Abbey is aiming to improve the management of early arrears activity for its entire U.K. mortgage portfolio. The mortgage firm believes that this is possible by engaging Westcot to manage 25% of its new mortgage defaults.
Westcot will be responsible for debt recovery and customer rehabilitation, through the handling of inbound and outbound telephone calls and payment processing from its offices in Saltcoats, Scotland. It will use Abbey's existing IT systems, which are in place because of an existing similar agreement related to Abbey's unsecured personal loan portfolio.
All mortgage loans will revert back to Abbey when they have reached 90 days in arrears, and no litigation will be completed by Westcot staff.
"It is not necessarily a surprise that a large prime U.K. mortgage lender is outsourcing some of its collections activity in the current market conditions," said Robbie Sargent, a director in Fitch Ratings European structured finance team. "Abbey has chosen a company whose management has prior experience in the mortgage market; 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."
As a result, Fitch said it will monitor the bank's collections outsourcing and what impact it might have on the bank's Holmes master trust series. Fitch noted Westcot's limited experience in collecting on residential mortgages, Abbey has provided specific training and has had two of its staff members staioned at Westcot's offices leading up to the arrangement. The operations begin on April 6.Abbey staff will remain in Westcot's offices for an extended period of time. Abbey has also employed other measures to mitigate concerns regarding its outsourcing of a suite of monitoring measures to a less experienced partner . It has only given Westcot 10% of new arrears cases in the initial stages of the outsourcing contract, before ramping up to a planned 25%.