Special Servicing is the provision of a combination of processes to support decisions on loans made against properties.
Usually a blend of bulk processes that are effeciently tracked, grouped and summarised to enable active loan monitoring and management.
Many loans will not deliver a reasonable performance if left to automated work-out strategies.
Such cases require large scale, efficient processing to deliver effective asset disposal
Bespoke Special Servicing produces better yields in cases where loan profiling and active assessment identifies suitable candidate loans for tactics such as loan modifications, assisted sales, discounted settlements etc.
Ultimately protection of investor/loan provider interests comes down to having access to on-the-ground-teams who are well informed, who provide effective and rapid-response property management; offering a variety of property options (lettings, refurbishment, development, outright sales etc).
Distressed Portfolio Recovery - Case Study
No handover of tenant or property records from the outgoing property manager
Void rate approaching 30%
High levels of tenant delinquency and arrears
Poorly maintained properties (including the absence of compulsory gas and electricity certification)
A potential liability of £250,000 for tenant deposits not registered with an independent deposit scheme
We were given 3 months to demonstrate our ability to stabilise the portfolio
Stabilisation – Months 1-3
Inspection of every property – schedule of emergency maintenance and compliance works
Full tenant audit and the production of a tenancy schedule for the funds
Establishment of new rental accounts and direct debit mandate (c.85% of tenants captured in month 1)
Resolving tenancy issues (numerous potentially litigious legacy disputes with previous agent)
Liaising with the administrator to recover rental income and tenant deposits
Transition – Year 1
Reduction of the void rate from 30% to 6%
Reduction of bad debt and tenant delinquency – rent collection stabilised at 99%
Full review of ERV’s across portfolio
Recovery of rental income from the administrator and recovery of £230,000 of tenant deposits
Full maintenance and compliance programme in place (reactionary and preventive)
Full HMO licensing of the properties as required (for environmental health purposed thus retaining class C3 residential status)
Development of a website and marketing strategy to let the properties
Optimisation – Year 2 and ongoing
Reduction of portfolio running costs
Increased rents where commercially viable
Strategic disposal of non-performing properties