Bridging and Commercial spent an afternoon with Laurence Morey, Chief Financial Officer of Oakwood Global LLP, to learn a bit more about what they do and talk to them about their recent move into the second charge arena....

How long has Oakwood been around?

Oakwood was founded in 2002, with predecessor companies dating back to the mid-1990s. 

What do you do and how can you assist a mortgage lender?

Oakwood is comprised of two related businesses; first, a loan servicing business that manages all aspects of individual or corporate borrower interaction from the ability to manage origination process, through basic loan administration (i.e. collecting payments and responding to queries) to special servicing, which could include amending the loan terms, commencing litigation and repossessing properties if necessary. 

Secondly, Oakwood is an asset management business that (working together with investor partners) sources, prices and acquires portfolios of loan receivables. Oakwood typically co-invests its own cash in the deals it sources.

For institutional investors that purchase assets, we have an affiliate entity that provides a legal platform for them to manage these transactions: our FSA regulated affiliated company Engage Credit.

How big is the company, in terms of employee numbers and also portfolio size?

Oakwood has £2.4billion in assets under management, representing around 17,000 individual loan accounts, and has 85 staff.

How have you managed to ride this recession?

We have bucked the trend - we have certainly been the most active servicer, both in terms of increasing head count and bringing on new assets under management. We boarded over £1billion in the last 18 months, and there are a number of reasons for this.

Firstly, the global financial crises prompted a number of originators and holders of mortgage collateral to reconsider their strategies and they determined to divest their mortgage portfolios - we were able to facilitate such sales, working in conjunction with our investor partners.

Secondly, some of our success is due to our special servicing capability. Lenders and investors acknowledge that in difficult times you need experienced, expert servicers to manage the more complex and sensitive decision-making and processes that you would expect in a recession: such as collections, arrears and repossession management strategies.

Can you explain a little more about your innovative workout strategies?

We are unique in that we have our own in-house real estate experts, who can help us to determine the true value of a mortgage receivable with reference to the related property security.

We own and control the entire credit and real estate management cycle in-house, from origination through early and late stage arrears management, on to repossession and real estate management culminating in shortfall recovery and management of professional negligence claims. Our ethos is to bring our experience as lenders to bear on our activities as a servicer, we understand the underlying objective of the portfolio owner and work towards achieving the best outcome for both our individual customers and corporate clients - we don't merely adhere to a standardised process driven by SLA targets (although we recognise that, where appropriate, an SLA is critical).

We provide a range of value enhancing services on behalf of portfolio owners; we can take on the regulatory burden, reputational burden, difficult decision-making, and because we often co-invest our own money we therefore share a financial interest in the best possible long term performance of that portfolio. We understand the business objectives, and we always work towards the best possible outcome both for the investor/lender and the customer, in compliance with the FSA's Treating Customers Fairly (TCF) guidelines.

According to FitchRatings, one of your strengths as a company is the experienced levels of your staff. Why have you chosen to recruit experienced professionals rather than younger employees who you could ‘mould’?

In this industry, life experience is important as well as business experience. Managing customers in arrears is a sensitive and emotive subject.

As a servicer we occupy a unique position – we are tasked with managing the potential conflict that arises between protecting the lender’s or investor’s economic interests, and responding to individual customer circumstances in a manner that limits customer detriment to the greatest extent possible. It requires a unique skill to achieve that balance. When a customer gets into financial difficulty, it is the first point of contact – the individual on the phone – that will define that customer’s experience, irrespective of the servicer’s overall expertise behind the scenes when it comes to arrears management strategies.

The individual on the phone needs to be capable of maintaining a two-way dialogue with the customer in difficulty, and should possess the necessary skills and life experience to identify the root cause of the customer’s predicament, the likely duration of the issue, and the scope and likely outcome of the forbearance and rehabilitation strategies that might be offered to the customer.

When we look at the profile of the average borrower in arrears – adults with families and complicated lives – it is clear that it requires a certain type of person to deal with them on a human level. It not only makes good business sense that the servicer is capable of dealing with collections as efficiently as possible, but also the element of empathy and understanding will pay dividends in terms of that servicer’s - and its client’s - brand and reputation.

Why did you recently decide to move into the second charge and unsecured loans market?

There is significant market demand for second charge and unsecured lending, and Oakwood is in a strong position to exploit these opportunities by supporting new lenders, existing clients or investors.

There are a large number of new institutions doing business in this space, and we have the transferable technology, infrastructure, people and processes to manage these types of assets.

To lead our growth in the second charge and unsecured loans market we have recently appointed Gerry McHugh to a new board-level strategic role as Director of Operations. He was formerly the global head of credit operations at Barclays Wealth and is well known in this sector.