Hi Brendan,
1. A CLO is typically comprised of leveraged corporate debt (the majority of which will be sub-IG rated). These are more active loans with higher per loan administration levels (covenant & information compliance, collateral management & facility amendments) so require more work than your typical mortgage however this is partly offset by the larger transaction loan balances (can range from $5mm to $50mm participations depending on the rules underlying the CLO). It's not a great proxy for a residential mortgage book but it's worth noting.
2. Re your comment on AIB. There really isn't any new owners. The mortgages are pooled and transferred into a bankruptcy remote SPV which issues a number of senior notes each with a slightly lower lower rating & payment priority ranking to the one above it (as the payment priority gets more subordinated the interest payable on the senior notes increase). The lowest (worst rated tranche) is the equity tranche which is typically retained by the originator (AIB in your example but mainly because no one else buys these tranches although you do every now and again hear of hedge funds buying pools of these at a discount but I'm not sure if it happens).
So by holding the equity tranche AIB essentially retains the residual risk on the mortgage pool. Once a certain amount is paid off the Bank may redeem the remaining balances on the remaining senior notes just to wind things up and the mortgages can be moved back to their own book or be packaged up again. But the main point is it doesn't really change the ownership, it simply allows the originating Bank generate new money to generate new loans.
3. I don't really disagree with Sarenco, for a performing pool of mortgages the costs would be lower than 35 to 50 bps (it's largely automated and reasonable corporate services costs can be added on top of the stated servicer fee).
However, aren't 12% of all mortgages now in default so it's not really comparing apples with apples in an Irish context.
Also, your reference to 3rd party servicer fees of 50bps would in my opinion, be a closer reflection of the actual costs (however I can't find any of these contracts).
With respect to the 50bps fee referenced above and the fees I link to below, note that those below are all being serviced in house & were, when the the notes were structured, performing loan books so (i) don't include any 3rd party servicer premium, (ii) don't include costs for managing out defaulted borrowers.
Think about it, there is no real necessity for the originator (AIB in your example above) to accurately reflect the cost of managing defaulted borrowers as they hold the equity tranche so any increase in actual servicing costs would only reduce their residual on the equity tranche. They can either get paid up front or they can get paid when the transaction winds up and the residual is paid out to the equity tranche. Perhaps on an NPV basis it might be an issue but it's less than 15 to 20 bps in most cases.
Some links and costs below to Irish securitizations with summary of the loan pools:
Kildare Securities Ltd (2007 BOI/ICS- Fee 12bps)
2.1% in arrears, 0.20% > 3mths arrears, avg LTV 63%, Avg balance 171k
Celtic Residential Irish Mortgages #9 (2005 1st Active/Ulster - Fee 15 bps)
2.5% in arrears (0.04% in arrears over 2 months), avg LTV 60%, avg balance 137k
Celtic Residential Irish Mortgages #11 (2006 1st Active/Ulster - Fee 15 bps)
2% in arrears (0.3% in arrears over 2 months), avg LTV 69%, avg balance 180k
Fastnet Securities 9 Ltd (2013 PTSB - Fee 15 bps)
5.6% arrears (0.16% >1mth), avg LTV 50% (indexed avg ltv 80%, avg, balance 118k
http://www.ise.ie/debt_documents/Pr...959-515c-4ae3-b188-94aa19bf39bb.PDF?v=2172015
Phoenix Funding 3 LTD (2008 KBC - Fee 15 bps)
avg LTV 66%, avg, balance 172k
