Securitisation made simple

1. Securitisation made simple Sarah Hind, Partner, Clarke Willmott Yogeta Partridge, Legal Counsel (Treasury), L&Q Treasury Management Conference: 8 October 2014

2. Introduction to Securitisation • What is it? • Large scale mortgaging • More money = more risk + more stringent requirements • Why do it? • Lack of grant/reduced reliance on grant = increased need for private finance • Support development pipeline • Objective? • Achieve best value in shortest time

3. The Securitisation Process • RP - send property list/Information Packs to RP’s solicitors • RP’s solicitors carry out due diligence • Review Information Packs • Disclosures for Certificate of Title • Valuer carries out valuation (liaise with RP/Funder) • Finalise security • Funder’s solicitors – Review Certificate of Title and advise Funder • Valuer – Review Certificate of Title and advise on value • RP and Funder – Sign legal documentation

4. Challenges to the process • RPs’ Perspective • Relationship between Development and Finance • Defective Mortgagee Exclusion Clauses • RP’s Solicitors’ Perspective • Accuracy and availability of property information from RP’s • Different Funders have different approaches • Both have a negative impact on time and cost

5. Addressing the challenges • Legal Treasury Group • Formed in February 2014 with support of Treasury Managers Group • Representatives from 21 RPs across the country • Objectives • Securitisation Working Group • Formed in August 2014 with support of NHF • Representatives from and on behalf of borrowers, funders and valuers including regulatory bodies • Objectives

6. Achieving Standardisation • Certificate of Title • Securitisation Working Group • Regulatory bodies to publicise the form for use • Mortgagee Exclusion Clause • Securitisation Working Group agree a sector approach • Set up meeting with regulatory bodies for Local Authorities to present, discuss and agree an approach • Regulatory bodies to publicise the approach for use

7. Standardised Certificate of Title • What is a Certificate of Title? • Legal report prepared by the RP’s solicitors • Highlights key information about the properties to be secured • Reviewed by the Valuer and Funder’s solicitors • Why does this need to be standardised? • To ensure consistency across the sector • To achieve time and cost efficiency across the sector

8. Examples of areas of focus for standardisation • Requirements for planning condition discharges • Section 106 obligations - compliance • Age of searches/search indemnity insurance • Restrictive Covenant/Restrictive Covenant indemnity insurance

9. Mortgagee Exclusion Clauses • What is a mortgagee exclusion clause? • Clause which provides for a Funder to be excluded from binding provisions within a legal agreement • Why does this need to be standardised? • Defective clauses = restricted value/unacceptable as security • Objective is to standardise the approach rather than produce a “cut and paste” clause

10. Example • “Chargee” - any mortgagee or charge of the Registered Social Landlord………… • Any Chargee shall prior to seeking to dispose of the Affordable Housing Units pursuant to any default under the terms of its mortgage or charge shall give not less than [ ] months’ prior notice to the Council of its intention to dispose…. • then the Chargee shall co-operate with such arrangements and use its best endeavours to secure such transfer • the Council must give full consideration to protecting the interest of the Chargee in respect of moneys outstanding under the charge or mortgage

11. Summary • Standardised CoT and standardised mortgagee exclusion clause • Timeframe for standardised CoT • General circulation – pencil date - Federation Finance Conference March 2015. • Timeframe for standard approach to mortgagee exclusion clause!? • Sector approach agreed by Securitisation Working Group by Federation Finance Conference March 2015 • Need your support! • Questions?