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

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

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

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

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

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

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

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

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

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

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?