Mortgage Packager Summit 2008

Monte Carlo seemed like an apt location to hold the second Mortgage Packager Summit, the land of fast cars, fast money and where people are willing to bet everything they own in a bid to win their fortune.

The packager community could do with a stroke of luck at the moment, with many packagers and lenders waking up to the realisation that now is not the time to mask the truth but to dig in and address the gritty issues that have been plaguing the industry.

There couldn’t have been a better time for packagers in the market to meet, greet and debate as to what the future holds for them and what they must do to ensure their survival.

While there wasn’t quite as much money being flaunted around the roulette table as there would have been in previous years, delegates were in fighting form and ready to tackle the market head on.

Despite the relaxed surroundings, packagers had a lot to get off their chests, and round one was fought against lenders.

Vic Jannels, chairman of the Professional Mortgage Packagers Alliance put forward some strong objections to lenders being able to withdraw their products with little or no notice and reducing payments for packagers while not passing them onto the broker in anyway.

Despite Jannels views that lenders needed to abide by Treating Customers Fairly, there were some who argued that it was not the job of the lender to treat the packager fairly, they just needed to be concerned for treating the customer fairly.
Lenders in the room were also caught out as to how to respond to the argument as they stressed that it was often not their decision or desire to pull the products at the last minute, but it was simply a matter of necessity that had been forced upon them from funders.

Once lenders realised that packagers were at the summit to talk business and not there to listen to some fluff surrounding the market, some lenders decided to throw out their pre rehearsed presentations and instead give a frank analysis of where they stood in the market, which was welcomed by packagers.

There was the suggestion that lenders that do withdraw their products should introduce quotas for packagers, so that they are allowed to put through a limited number of cases per year for example, which means they would not take advantage when a lender pulls a product.

This idea was greeted with confidence, and lenders such as Beacon Homeloans say that it will start to consider it. However this would need an agreement between both parties and packagers need to agree not to submit a large number of cases, which could lead lenders to have a spike in business volumes. There seemed no easy solution to what is a very big problem in the packager market. Packagers wanted to put the blame to lenders, while lenders felt that their hands were tied because they were answerable to the powers that be.

There were also some that felt that it did not rest upon the lender to make sure they were treating the customer fairly, as their duty is towards the customer, not the packager. However, the ultimate effect of lenders pulling products some argued means that they are not treating the consumer fairly either.

As the debate moved on, one audience member received jeers from the crowd when they asked packagers if they would be willing to accept some form of agreement where a lender could claw back commission from the packager if the loan did not perform. Although this was not greeted well, later on in the discussion it was agreed that the format could work if there was a structure where packagers could be paid more if the loan performed well. This proved popular among packagers, but some lenders felt that this would mean that they were paying the packager twice over.
One lender also pointed out that people can default on their mortgages for a number of reasons and this might not always reflect on the underwriting skills of the packager, so it would be unfair to punish them.

The next area that was up for debate was the long awaited packager code of conduct, which the packager task force, headed up by Robert Sinclair at the Association of Finance Brokers has been working on. The sudden realisation that the code was entering its final stages hit home, and as a result a lot more packagers and lenders wanted to have their say.

One of the questions that arose was if the code would contain a definition as to what a satellite packager was. There was some concern that there are people operating in the market that only carry out a few deals a month but are classing themselves as satellite packagers. While some in the room felt that this was acceptable there was an overall feeling that this should not be allowed to happen, and even a fear that it could lead to satellite packagers taking away business from the mainstream packagers.

Packagers welcomed the idea that the packager code would include some guidelines regarding what a satellite packager is.

The debate then moved on to the controversial issue of VAT and whether various associations and alliances should be liable for this. There was a strong difference of opinion between what people felt that they should be doing. On the one hand, some firms had been advised that they should be paying the tax, while others felt that they had been advised correctly and were not paying the tax. There was no clear winner in this argument as both alliances felt that they had been advised correctly, arguing that they had both sought clarification from qualified advisers and were doing the correct thing. Understandably, people in the room that were paying it felt that especially in the current troubled times in the market that others should be paying it, as it was quite a large bill to foot.

Only time will tell who has been advised correctly, and whether someone will be in line for a hefty rebate, or someone will be in line for a large bill.

As the Mortgage Packager Summit came to a close there was an air of confidence and the feeling that there was a strong future for the packager market. Many realised that it would be a case of survival of the fittest, leaving delegates looking to themselves and their neighbours wondering if they have everything it takes to weather out the storm.