Exact assigned special servicer rating by Fitch

Charter Court Financial Services Limited, more commonly known as Exact Mortgage Experts, has been assigned a residential special servicer rating of 'RSS3' by Fitch Ratings.

The special servicer rating reflects the high level of experience of the executive team and levels of experience of special servicing staff of 11 years that is above UK peers.

Exact operates a mix of workout methods including real estate owned payment arrangements and loan modifications.

In the past 12 months, Exact has repossessed less than 100 properties, with 85% of them sold through estate agents and 15% sold by auction. Average proceeds received versus open market value stood at 104% for properties sold through estate agents and 80% for properties sold by auction.

Exact also works with established third-party providers of legal services, asset management operations and debt counselling.

Fitch said it would like to see Exact build on its experience of working out defaulted loans. However, it acknowledged that several key employees have demonstrable experience from previous employers of working on large portfolios requiring complex workout solutions, which helps mitigate this issue.

A structured training and development programme is in place and training hours for existing staff are above those of Exact’s peers and the Fitch benchmark of 40 hours per staff.

The ratings are also supported by Exact's ability to administer a residential mortgage portfolio and to deliver consistent performance of loans in arrears with management strategies in place.

Fitch notes that policies and procedures are well documented at Exact, but internal audit is not as robust as those of its peers. The company aims to hire experienced industry professionals to help redress the balance over the next 12 months.

Internal audit is currently delivered by a combination of third-party resources and experienced risk and compliance staff. Risk is further mitigated by the risk management framework in place, including appropriate governance and monthly risk monitoring and testing.

As of October 2011, Exact's servicing portfolio totalled £444 million, comprising nearly 3,150 loans. It is also a standby servicer for a securitised portfolio of almost £1 billion.

While Exact has traded profitably since launch, the wider Charter Court Financial Services Group has reported losses each financial year from 31 December 2009 to 30 September 2011, reflecting investment over that period in Exact and other mortgage-related business lines, including origination.

Fitch notes that growth in servicing revenue, which currently represents 50% of income, in the medium term, will be important for supporting the company's financial stability in a challenging market environment.

Exact is owned by a combination of companies owned by the hedge fund Elliott Associates.