HML's round-up for May 2014 of the biggest mortgage and financial sector stories in Ireland, including unemployment, house prices, mortgage arrears and bank profits.

1. MAY 2014
HML Ireland managing director David Kelly has spoken to the
Irish Independent about why banks are paying for independent
debt management support for their customers in mortgage
arrears
Moody’s upgrades Ireland’s credit rating by two notches to
Baa1, with a stable outlook
permanent tsb has seen a decline in underlying arrears levels,
with total arrears in its buy-to-let and home loan portfolios now
around 10% below 2013 peak levels

2. HML News
David Kelly has spoken
exclusively to the Irish
Independent about debt
advice for customers in
mortgage arrears.
You can read the article below:
Why some banks are paying for
independent debt management support for
their customers in mortgage arrears
HML manages mortgages and other loans for
a range of banks in Ireland and the UK with a
total value of approximately €50 billion. This
gives us a useful perspective into how the
banks in the two countries compare in terms of
dealing with mortgage arrears and whether
there are any lessons for banks in Ireland from
their UK counterparts.
The first thing to say is that it is clear now that
the Irish banks have moved into a new phase
in dealing with the mortgage crisis. After what
all sides will agree was a very slow start –
linked no doubt to both the scale and the
sensitivity of what was an unprecedented
crisis for this country - the banks are now
addressing the mortgage arrears problem with
real vigour and on a scale that was hard to
imagine even 18 months ago.
However, while the banks are able to engage
with the majority of their customers, it is also
clear that for some customers, their
relationship with their bank has been
destroyed almost beyond repair. Confidence
and trust in the bank has collapsed and
contact has been broken off. For customers in
this situation, this means that it is much more
difficult for them to get proper advice on how to
deal with their problem and, for the banks, it
means that it is almost impossible to try to find
a workable way forward.
Ironically, many customers might get an initial
sense of relief or even euphoria when they
decide not to engage with their lender. But it’s
a very false and misleading feeling. Breaking
off communications may delay otherwise
difficult decisions but it makes very unwelcome
outcomes much more likely. The likelihood of
repossession, for example, increases
significantly where there is no engagement.
On the other hand, we find that where
engagement is restored, outcomes can
improve significantly. And the earlier
customers who are in financial difficulty can
get can advice that they trust, then the better
the outcome for both the customer concerned
and for the lender.
The key here is trust. In the midst of a
mortgage crisis, unfortunately, some
customers simply won’t be able to bring
themselves to trust the advice they are getting
from the bank – regardless of how fair or
balanced that advice is. They may have lost
confidence in the bank or they may be afraid to
share the details of their financial position with
the institution in question.
In the UK, banks are responding to this by
putting in place access routes for their
customers to independent debt management
agencies.
Many people are surprised that banks might
be willing to encourage – even to pay for –
independent advice on debt management
issues for customers who are, effectively,
refusing to talk to them. But in our experience
they are. The reason is simple. In one sample
of customers we manage on behalf of a UK
bank, for example, over 85% of customers
who received independent advice on
managing their debts paid more back to the
bank than they were doing previously.
Continued on the next page

3. HML News
In that sample, the bank saw an increase in
“cash collected” of some 50% as a result of
helping the customer get independent, trusted
advice.
However the exercise works for the customer
as well as the lender. Customers in our
sample talked of feeling a sense of control
returning over their financial affairs. They talk
of regaining self-respect and being able to
sleep again at night.
In the UK we now work closely with an
independent debt solutions agency to whom
we can immediately refer customers whom we
believe would benefit from their
assistance. The banks involved encourage us
to do so – to the point of empowering our
customer agents to initiate the referral -
because they know that the outcome will likely
be better both for them and for their
customer. Once the referral is made, the
customer then deals directly with an appointed
case-manager at the relevant debt
management agency who will help them to
develop a Debt Management Plan (up to and
including an Individual Voluntary Arrangement
/ IVA) and manage it out over time.
However the key is making that referral as
easy and speedy as possible. Our agents can
make the referral from the phone call on which
they are engaged with the customer;
seamlessly putting the customer in touch with
an agent who can begin work immediately.
Irish banks have made tremendous strides in
recent months and some banks are now
experimenting with referring certain customers
to independent advisors. However, it is
occurring now only on a relatively small scale.
Perhaps the next challenge is how to put in
place the type of broader infrastructure that
could cope with the likely demand that exists
for this type of service.
The outcomes we’ve seen for both sides of the
mortgage arrears crisis suggest this could
make the effort very worthwhile.
You can also read the article on the Irish
Independent online.

4. HML News
HML is celebrating ten years
of operating in Derry.
HML has been servicing Irish lenders’
portfolios since 2005, with the Derry office an
important strategic move for HML’s expansion
in Ireland.
Currently based out of Ulster Science &
Technology Park, the Derry office has grown
from a staff of around 25 in 2004 to some 330.
The Derry office has been central to HML
expanding in the Republic of Ireland, with the
company making significant contract wins in
the country.
HML has over 25 years of experience in the
mortgage administration sector, and chose to
open an office in Derry in order to draw upon
the financial expertise in the city at a time
when many financial companies chose to
outsource abroad. There are 62 members of
staff who have been with HML in Derry since
2004.
HML’s Derry site has acted as a call centre for
Children in Need since 2008, raising
thousands of pounds for local charities
including Foyle Hospice and has supported
local schools, such as during the Time to Read
initiative.
Andrew Jones, chief executive
officer at HML, said: “I am delighted that
HML’s Derry site is celebrating ten years, and
we have certainly substantially grown during
that time. Opening a site in Derry was an
important strategic move for us, drawing upon
the experienced resources in the area and
helping us to take advantage of growing
opportunities in the Republic of Ireland.
. “I’d like to thank all of our Derry staff for their
hard work, particularly those individuals who
have remained at HML since we launched in
Northern Ireland in 2004.”
Mel Smith, director of strategy and
planning for the chief operating
office and who is based in Derry,
commented: “It’s certainly an exciting time
for HML. We celebrated 25 years last year, as
well as launching a new operational base in
Dublin, enjoying double-digit profit growth and
took home numerous industry awards.
“Celebrating ten years in Derry is testament to
our experience and longevity, which have also
contributed to our leading ratings. Our UK
residential primary (sub-prime) rating by Fitch
is the highest in Europe and our prime rating is
the equal highest rating of any servicer in the
world.
“I’d like to thank all HML staff in Derry for their
hard work over the years, and look forward to
seeing how we grow and develop in the
future.”

5. Industry Statistics
Date reflects what the statistic was during that period, rather than when the statistic was published
Consumer Price Index (Central
Statistics Office)
APRIL ‘14
0.3%
MARCH ’14
0.2%
FEB ’14
-0.1%
European Central Bank (ECB)
Base Rate
MAY ‘14
0.25%
APRIL ‘14
0.25%
MAR ‘14
0.25%
Unemployment Rate (Central
Statistics Office)
APRIL ‘14
11.7%
MARCH ’14
11.8%
FEB ’14
11.9%
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+
Q4 ’13
136,564
96,474
39,250
30,706
Q3 ’13
141,520
99,189
40,426
31,227
Q2 ’13
142,892
97,874
39,948
30,326
Home Repossessions (CBI)
PDH
BTL
Q4 ‘13
1,014
503
Q3 ‘13
1,050
516
Q2 ‘13
1,001
502

6. Industry Statistics
Consumer Price Index
The CPI in April was 0.3% higher than the
same month in 2013. It increased by 0.1% on
March, with notable upward pressures coming
from the education (4.5%), alcoholic
beverages and tobacco (3.7%) and
miscellaneous goods and services (3.2%)
sectors.
This was partially offset by declines in clothing
and footwear (-3.7%) and communications
(-3.3%).
ECB Interest Rate
The ECB base rate remains at 0.25%. Mario
Draghi, president of the ECB, said:
“We firmly reiterate that we continue to expect
the key ECB interest rates to remain at present
or lower levels for an extended period of time.”
Unemployment Rate
The unemployment rate declined by 0.1% from
March to April to 11.7%, representing 392,700
people out of work. In the same month in
2013, the unemployment rate stood at 13.6%.
House Prices
The 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.
Arrears
Principal Dwelling Houses (PDH)
The number of PDH mortgage accounts in
arrears declined by 3.3% between Q3 and Q4
2013. Almost 18% of accounts were in arrears
by the end of Q4 2013, representing a total of
136,564.
There was a 2.3% fall in 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 33,589, representing almost
63% of outstanding arrears on PDHs and
balances of €6.9 billion.
Buy-to-let (BTL)
The number of BTL mortgage accounts in
arrears declined during Q4 2013 to 39,250,
representing 27% of accounts. However, there
was also an increase in the number of those in
arrears of more than 720 days, representing
8.4% of accounts with balances of €3.9 billion.
Home Repossessions
At the end of Q4 2013, there were 1,014 PDHs
and 503 BTLs in lenders’ possession. Of the
PDHs, 168 were taken into possession during
the quarter, 63 of which were the result of a
court order, while 105 were abandoned or
voluntarily surrendered.

7. Top News Stories
Ireland’s credit rating has
been upgraded by two
notches by Moody’s.
Moody’s has increased the rating to Baa1, with
a stable outlook.
The main drivers for the decision included a
change in projected future debt levels, a
significant reduction in off-balance sheet
exposures and an improved credit position
compared to other Baa-rated euro countries,
such as Spain and Italy.
Moody’s said: “Ireland's credit profile is
recovering more quickly from the euro area
debt crisis as a result of its economy's
dynamism and growth prospects.”
However, the rating agency added that the
country’s credit rating remains constrained by
significant risks within the banking sector -
including large stocks of non-performing loans
- and a high level of public debt.
permanent tsb has seen
underlying arrears levels
decline.
In its latest trading update, the lender revealed
that arrears levels had fallen within its Asset
Management Unit’s loan portfolios. As a result,
it said its impairment charge for 2014 will be
significantly lower than the past two years.
Total arrears in its BTL and home loan
portfolios are around 10% below peak levels
experienced in 2013.
It also said it was on track to meet arrears
resolution targets. By the end of April, it had
offered 19,000 long-term treatments to
borrowers, with 15,700 accepted.
permanent tsb has engaged with over 80% of
customers under the Mortgage Arrears
Resolution Targets. However, it urged those
borrowers who had not yet engaged with its
Arrears Support Unit to do so, saying “it is our
clear preference to restructure a loan, where
appropriate, rather than resort to legal action”.
The proportion of Irish
mortgages in arrears of three
months or more has reached
a new peak – Fitch report.
This is according to a new report by the rating
agency, which noted the proportion of those
mortgages in long-term difficulty increased by
0.1% to reach 18.4% in Q1 2014. However, it
represents a rise of 1.7% when compared to
2013’s full-year statistics.
Some within the market have suggested that
because Fitch tracks portfolios that contain
more BTL loans than is typical for the market
average, the arrears problem could be more
prominent in this sector.
The research note also stated that outside of
Dublin, it expects house price affordability to
improve due to an oversupply of properties,
particularly as a result of forced sales.
Fitch added that while house prices in Dublin
are rising, it is unlikely they will hit levels
witnessed during the peak of the market.

8. Top News Stories
Taoiseach Enda Kenny has
told European Union leaders
that Irish families are “worn
out” with dealing with the
economic downturn.
The Irish Times reported him as making the
statement after arriving in Brussels for an
informal summit of European leaders.
Mr Kenny said: “I did point out to the
council that in Ireland we have had five to six
years of very difficult circumstances, that many
families are really strained and worn out with
the challenge that they’ve faced and put up
with.”
He added that while on paper unemployment
continues to fall, improvement is being felt by
families on a daily basis.
AIB has returned to
profitability for the first time
since it was bailed out.
AIB said it returned to profit in Q1 2014 as a
result of reduced losses on loans and lower
costs.
Total impaired loans stood at €28.2 billion at
the end of March, a decline from €28.9 billion
at the end of Q4 2013. AIB also revealed that
its new lending volumes climbed by 60% to
€1.1 billion.
David Duffy, chief executive officer
at AIB, said: “We are delivering our stated
objectives which include increases in new
lending drawdowns, the recent EU
Commission's approval of our restructuring
plan, improvement in the cost of funding and
capital position, supporting customers in
financial difficulty and a decrease in overall
impaired loans.”
Consumer sentiment in the
residential property sector is
improving, according to a
new survey by AIB, Property
Industry Ireland and Sherry
FitzGerald.
The Residential Property Outlook Report noted
that 74% of potential buyers want to purchase a
home within the next six months. Just under a
fifth plan to buy within the next year.
Almost 80% of first-time buyers (FTBs) are
currently renting, while 16% live with a relative.
However, there is not just demand from FTBs,
but also from homeowners who wish to trade
up.
According to the report, 23% of potential
property purchasers in Dublin want to trade up,
while this stands slightly higher at 25% in Cork.
Ulster Bank has made a
profit for the first time since
2009.
It noted an operating profit of £17 million
(approx €14 million) for Q1 2014, the first time it
has posted a profit since the same quarter five
years ago.
Impairment losses have fallen by 80%, with
chief executive Jim Brown
commenting: “Improving customer demand,
our ongoing focus on underlying expenses and
the benefits of our work in helping our
customers in mortgage arrears will continue to
drive the momentum in the recovery of our
business.”