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John Rice

Regulatory Alliance of Mortgage Packagers: A positive market influence

By enabling smaller packagers to cope with the demands of compulsory regulation as well as researching the exploding choice of mortgage products in the the non-conforming arena, packager associations are contributing to wellbeing of the entire market.

The death knell of the packager has been foretold so many times in the past few years, becoming particularly shrill at the time of M-Day. Yet two years on from that event there is clear evidence that the demand for packagers’ services has never been so great.

But in order to thrive in the new environment distributors have had to evolve and the most obvious manifestation has been the growth of packager associations – groupings of packagers and distributors. This development has brought together different and competing businesses into alliances providing mutual benefits, as well as brands that introducers recognise and with which they feel comfortable.

While the most obvious advantages for some associations were based on the leverage that could be brought to bear in negotiation with lenders, the Regulatory Alliance of Mortgage Packagers believes that the most important aspect of lender relations is to work in partnership with them to create a seamless distribution process in a compliant atmosphere. In fact, the importance of packager associations has grown in direct proportion to the implementation of compulsory regulation, with its emphasis on treating customers fairly. It is the very regulatory rules that have ensured that good packagers have flourished.

Under regulation, intermediaries and their clients require greater transparency and more information. This in turn means that in the multi-option layers of the non-conforming market evidence of market research, rather than opting straight for one lender, have become increasingly important. While packagers’ original strength lay in their ability to give lenders a low-cost distribution route, more intermediaries faced with an exploding choice of products in the non-conforming arena rely on packagers to guide them through the maze of competing products to allow them to make the right choices for their clients.

The effect of the move to an all-enveloping regulatory environment has had other consequences which have played to the strengths of packagers. Mortgage networks have found that the cost of compliance is high, both in the resources required and the danger of financial sanction, particularly in the non-conforming market.” Packager associations have been helping networks to meet regulatory obligations and control the compliance cost burden”In terms of oversight, packager associations have been successful in helping networks to meet their regulatory obligations and keep the compliance cost burden under control. Being able to have nominated packagers that can help by offering not only the right service and mortgage options but also the facility to allow networks to audit their appointed representatives’ activity is becoming more and more important. Clearly, only packagers of a certain size have the financial muscle to be able to offer a full oversight facility to their network partners, but it is becoming a necessary feature for packagers wishing to maintain their position on network panels.

This year RAMP intends to take a leading role in establishing a new compliance forum with members drawn from all parts of the mortgage industry – lenders, packagers, appointed representatives and directly authorised intermediaries. At a time when all parties have their own individual voices, there is no doubt that the effect could be multiplied if there was a chance to bring those elements together as a unified voice. The Mortgage Compliance Forum will be looking to provide focus and its role will be to formulate not only responses to proposed evolutionary changes to the compliance code but also to be proactive in working with the Financial Services Authority on concerns with existing practice and how to improve them.

In the move to a principles-based regulatory framework, the onus on intermediaries, particularly the smaller ones, will be higher as they will have to ensure that their interpretation is sound. Packager associations are ideally placed to offer compliance services and probably more so than other outside agencies. This is because there will already be a working relationship with the intermediary.

If packager associations are going to prosper further they have to build on the existing services that are already being offered. The benefits of better products and procuration fees are only part of the mix. The chances that associations have to positively influence the future direction of regulation and its effect on the industry as well as using their combined expertise to help and support the intermediary market to establish permanently compliant sales and administration processes will have beneficial and far-reaching consequences for the whole industry.

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