Higher proc fees for lower LTV business may emerge

27 September 2010 | By Samuel Dale, Natalie Thomas

Brokers could face lower proc fees for high LTV clients as lenders try to incentivise brokers into finding lower LTV borrowers, says the Association of Mortgage Intermediaries.

Robert Sinclair, director of AMI, says proc fees could be higher for lower LTV deals as lenders use brokers to attract borrowers they want.

He adds: “I am concerned that we might see changes in the world of proc fees. One way that lenders might think about changing things is to pay more for business that is more attractive to them, which are low LTV customers.

“It is harder to place high LTV business so it could result in lower proc fees being paid. This will make life more difficult for brokers.”

Three years ago lenders were paying higher proc fees for sub-prime deals which is one way lenders incentivised intermediaries to get that business.

Sally Laker, managing director of Mortgage Intelligence and Mortgage Next, says: “Lenders are looking for quality of business and may use proc fees to get it. The buzzword at the moment is quality and lenders may pay a premium for such business and applications that are fully completed.

“There has to be some give and take though and it could be that those who submit the best cases get a higher proc fee and those that don’t receive a lower one.”

She adds: “The way lenders will focus on quality is through rationalising the channels they deal with and design products to attract certain types of customers. They will target those on low LTVs and alter credit scoring to weed out borrowers they don’t want.”

David Hollingworth, head of communications at London & Country, agrees that the focus of lending will be on quality not quantity.

But he adds: “I can’t see proc fees being differentiated in this way. I don’t think lenders need to do it.”

Ray Boulger, technical director of John Charcol, also does not believe lenders will differentiate proc fees based on clients.

He says: “I can’t see any scope for lenders to pay a different proc fee for the same rate but different customers. It would be impractical to do it because of the Key Facts Illustration. It’s a complete non-starter.”

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