DBRS Morningstar issued a commentary on Italian court rulings that question the validity of separating master and special servicing roles in securitisation transactions under Italian law. The Italian Securitisation Law mandates certain activities to regulated banks or financial intermediaries. Master servicing involves compliance and receivable collections, while special servicing handles the recovery of outstanding debts.
Recent court decisions have disrupted foreclosure proceedings by special servicers, not recognised as banks or authorised intermediaries, leading to potential delays in recoveries. The EU’s upcoming Servicers’ Directive and Italy’s corresponding transposition law may address these regulatory conflicts.
DBRS Morningstar’s commentary addresses the Italian courts’ scrutiny over the segregation of servicing roles in securitization, as stipulated by Italian law. The law requires regulated entities to handle master servicing tasks like compliance and collections, whereas special servicing, such as debt recovery, has different requirements. This division is being legally challenged, affecting foreclosure proceedings by special servicers.
The situation awaits clarification from a higher court ruling, which could affect debt enforcement and recovery timelines. Italy’s legislative developments in response to the EU’s Servicers’ Directive may harmonize national law with EU regulations, potentially providing resolution to the current legal ambiguities.