Founded at the start of the packager revolution, family-run AToM now hopes to lead the new age of distribution
The importance of family businesses to the UK economy is remarkable, even in an age when global corporations touch every part of our lives.
A report published at the end of last year by the Institute for Family Business estimated there were around 3 million family-run businesses in operation today. They accounted for around 61 per cent of all private-sector firms, employed about 9.4 million people and were responsible for around a quarter of UK gross domestic product.
Family firms are less well represented among the mortgage market’s established names but there is one that stands out. Employing six members of the same family, All Types of Mortgages epitomises the family-run business.
Managing director Dale and director of IT and administration Neal were given the task of running ATom in 2011 when founder Vic took a step back to become chairman. Vic’s wife, Sheila, is finance director; Dale’s wife, Catherine, works on intermediary sales; and Neal’s wife, Carolyn, chases completions.
To some people, working so closely with family members would seem like a nightmare. So how does it work for the Jannels clan?
“It couldn’t be better,” says Vic. “We have had people approach us over the years wanting to put pound notes in our pocket and take over the brand but we have always resisted and will continue to resist.
“We have something that we think is quite unique. We don’t fall out; we have our rows but we tend to discuss things.”
Dale adds: “Over the years we have built up a nice team of about 28 around us. We have a lot of really good people who have been with us for over 10 years, know us inside out and are on top of their game still.”
So how did ATom come into existence?
Vic’s career in financial services started in 1972 at what was then Provincial Building Society. After 12 years he left to become Stephen Knight’s number two within Citibank’s mortgage division, moving on again two years later to set up an IFA business.
In 1991, Vic changed direction by setting up AToM, first as a brokerage. But in 1996 the business morphed into a packager. “I decided I wanted to break into packaging – this new thing that everyone was beginning to look at,” he says.
“So I sold my interest in the other company and started AToM. Obviously I didn’t have any clients as such so I created an office in the playroom at home, put a few adverts in the local paper and it all went from there.”
Vic had chosen the right time to enter the packaging sector, with specialist lenders such as Kensington and GMAC-RFC beginning to make a splash. Before long these new lenders were placing underwriters in the offices of packagers and specialist lending was born.
“GMAC was one of the first to put an on-site underwriter in AToM’s head office,” says Dale. “The business literally quadrupled overnight.”
Specialist lending grew exponentially and, by 2007, non-bank lenders accounted for more than £30bn of lending. At its peak, AToM employed around 90 people.
Of course, the boom ended with the onset of the financial crisis. The closure of wholesale markets cut off funding for non-banks and the specialist lending sector all but disappeared.
Simultaneously, the term ‘packager’ became a dirty word and this reputation lingered for some time.
Surviving the fallout
However, in the past few years a new breed of specialist lender has emerged, led by the likes of the already established Kensington Mortgages and young upstarts such as Precise and Pepper UK.
This revival is intrinsically linked with the health of the packager market.
“If you go back a couple of years, the word ‘packager’ was not to be mentioned,” says Dale.
Vic adds: “When the recession hit in 2008, we believed – as everyone else did – that it would be a two- or three-year animal. And our view was always that, while lenders were using the opportunity to move away from distribution and drag business through branches, the world would change and it would come back to a point where distribution packaging was a core feature for the majority of lenders.
“What we are seeing at the moment is some of the smaller lenders, building societies, actually knocking on our door and asking how we can work with them.”
A common feature of today’s market, however, is the due diligence that lenders conduct on their distribution partners.
“It is a particularly robust process that lenders go through now because they do not want packagers sending in cases that are not fully packaged while they chase volumes,” says Vic.
“Historically, I think this is why a lot of lenders were keen to see the packagers shut down when the recession hit, because they were actually paying money for stuff they could have got from elsewhere.”
While the old packaging alliances such as the Regulatory Alliance of Mortgage Packagers and the Alliance of Mortgage Packagers and Distributors may be long gone, AToM was at the heart of Equis, a body created last year to improve standards in the sector.
While the four members have some distribution muscle – collectively they write around £1.5bn of business a year, according to Dale – Equis does not exist for commercial gain but to set the bar for how packagers should operate.
“The whole idea of Equis was recognising that distribution and packaging were coming back into the market in a big way,” says Vic. “It was to try and establish a code of conduct that all packagers would adhere to and that was beneficial to all parties in the chain.
“That is, obviously first and foremost, the customer, but equally importantly the lender, and equally importantly the distributor. And it is also important from a regulatory point of view. There could never be any question about the important part we play in the chain.”
While the specialist market is far healthier than it was just a few years ago, there are still swathes of so-called mortgage misfits who are not catered for in the post-Mortgage Market Review world.
Some of these groups are well known, namely the self-employed and older borrowers. But the Jannels believe that one of the most pressing matters in the market is how to convert tenants into homeowners.
“The big problem – and this is one we looked at about 10 years ago – is people in rented accommodation who don’t have a large enough deposit but have proved they can pay because they have been paying rent,” says Vic. “In most cases, these people are paying more in rent than they would for a mortgage.
“I fail to see why lenders have not grasped that as a very realistic proposition to lend money on and help a first-time buyer onto the market.”
Vic also cannot understand why most lenders are unwilling to use the transitional arrangements – which allow them to waive many of the rules brought in by the MMR to avoid people becoming mortgage prisoners – to take on borrowers from other lenders before the implementation of the EU Mortgage Credit Directive, which will put an end to this practice.
He says: “If we look at the mortgage prisoner, I fail to see why lenders will not assist someone who has paid their loan for the past few years without any hiccups. They may not tick the current, post-MMR criteria but you have to be sensible about this. I think that is an area that has got to be tightened up.”
AToM also operates in the buy-to-let, bridging and commercial mortgage sectors. While the family say the bridging market is “very healthy”, they believe there is room for it to grow.
“Because one or two of the smaller lenders are coming in with more competitive rates of interest and fees, I think the market will continue to grow for some time,” says Vic.
“But there will come a time when the larger, more traditional lenders will start to recognise that this is an area of the market they could encompass – in which case you will see a different type of rate war.”
The buy-to-let sector has taken a battering from policymakers over the past few months, reflecting concerns that the sector is growing too quickly.
Not only has the Chancellor cut tax relief to the basic rate of income tax, he has added a 3 per cent surcharge to stamp duty for landlords and revealed he will give the Financial Policy Committee the power to contain the sector.
Vic says: “I sat on the board of the Association of Mortgage Intermediaries representing packagers when regulation came in in 2003/04. One of the things I regularly commented on was that, if mortgages were going to be regulated, why didn’t they regulate [all] mortgages?
“Why differentiate between regulated, like residential, and leave investment properties to one side? In essence they are one and the same thing and now [the FPC is] going to introduce a raft of legislation. Wouldn’t it be nice if, for two or three years, there was no change?”
He adds his belief that it is simply a matter of time before conduct regulation of buy-to-let is introduced.
Moreover, Dale is convinced that packagers will eventually become regulated too. “We have had the regulator ask how it should regulate us, how it should deal with us. At some point we will be on the radar and at that point we will be ready. But there is a fine line between advice and recommendation.”
While that point appears some way off, AToM intends to boost its technology in the meantime and has plans for steady growth, with expat mortgages and limited company buy-to-lets being key focuses.
Vic stresses that he has passed on the AToM torch to both Dale and their younger brother, Neal. Having a degree in IT, Neal is tasked with pulling the business into the 21st century.
“We have always been a paper-based company: underwriting, payslips, P60s and all the other documents are paper-based,” he says. “But, as I see it, we are moving to technology where everything will be online. So we’re in the process of changing Atom into a paperless company.”
Neal is also working on an online system whereby a broker can perform a decision in principle, source a product and pre-populate lenders’ application forms. But there are hurdles to overcome first.
He says: “There is so much security involved that we have got to be careful, obviously. The way we are trying to go is that you input it once and you don’t have to do it again. That is where technology will go. The problem is getting the lenders on board and the IT companies to give them permission to get that started.”
AToM was around for the start of the packager revolution and, under the stewardship of Dale and Neal, it seems to be aiming to lead in the new age of distribution.