Payment holidays boost securitisation’s shift to digital

One legacy of Covid-19 will be the adoption of technological solutions that improve how we help clients deal with their pain points

Innovations in technology have had a huge impact on securitisation in the past few years. The pandemic has prompted growing numbers of payment holidays – temporary postponement of mortgage payments – giving the industry further reason to embrace digital operations.

Potential problems include a lack of standardisation in payment holiday reporting and in determining when a mortgage is deemed in arrears, as well as uncertainty about how these will be characterised post-Covid. A lack of consistency in addressing large cash-flow interruption across different originators and pools is another big issue that could affect ratings.

The Association for Financial Markets in Europe((AFME) strongly advocates improved digital operational resilience and encourages technology adoption. Using an automated and outsourced model based on best practice standards of reporting will provide a consistent approach, increase transparency and mitigate future problems.

A comprehensive technology solution enables securitisation processes to link seamlessly together. As artificial intelligence (AI) becomes more powerful, this will become more pervasive through origination. For example, securely linking smart contracts to standardised credit scoring will help with underwriting.

Another advantage of moving to a more automated platform is that securitisation and issuance become quicker and cheaper. This brings a significant material advantage, as even small savings provide a competitive edge when dealing with fine margins.

Meanwhile, as part of our commitment to ensuring data security, we established the LoanByLoan portal with our joint venture partner Hypoport in 2019. The portal contains a data compliance platform for structured finance transactions, which is available to stakeholders.

LoanByLoan helps issuers of asset-backed securities (ABS) and collateralised loan obligations (CLO) to comply with the Securitisation Regulation (EU) 2017/24. LoanByLoan has teamed up with European DataWarehouse to help originators meet cash flow model disclosure requirements by using the Simple Transparent Standardised (STS) Cash Flow Model Engine.

The platform is one of the largest European structured finance portals and is favoured by more than 700 active institutional investors. It is already used in most securitisations in the Dutch mortgage market, for example, and we are now rolling it out in the UK.

Intertrust Group was also authorised by the Aviation Working Group (AWG) early in 2020 to act as trustee service provider for the Global Aircraft Trading System (GATS), a fully electronic platform for trading aircraft on lease. We are the first company outside the US to be authorised to do so and the only GATS trustee to be approved in Ireland and Singapore.

Additionally, we are one of the leading platforms for loan administration, particularly in the football sector. For example, Intertrust Group was recently appointed by MetLife Investment Management to facilitate a £117.5m loan package to the English Football League.

Despite many sporting events being put on hold during the pandemic and an uncertain economic environment, we believe the sporting sector is set to flourish and that sporting leagues will therefore increase their debt limits to provide more financing.

We also expect institutional investors and large corporates will take advantage of the many opportunities within this market, establishing new and innovative ways to finance sports transactions.

The move to digitalisation will benefit all areas of securitisation, particularly in the prime market. The more data we can interface through technology, the easier it will be to meet regulatory requirements.

Many issues surrounding payment holidays might be temporary, but digitalisation in the securitisation sector is certainly here to stay. Intertrust Group’s expertise means we operate as a trusted partner to our clients, providing seamless execution within a transparent and secure digital model.

Intertrust Group has recently won the SPV Administrator of the Year award at GlobalCapital’s European Securitization Awards

Why Intertrust Group?

• We are dedicated to providing world-leading management, administration and reporting services to debt issuance, securitisation, structured and alternative finance transactions.
• Our local, expert knowledge and innovative proprietary technology combine to deliver a compelling proposition.
• Our expertise covers the whole range of asset classes, from public and privately-placed bonds to securitised loan warehouse facilities.