A recent news item in Mortgage Distributor voiced an opinion from a leading industry spokesperson that the FSA was getting tough on lender distribution, which would result in packagers being culled from lender panels. Thankfully, the report ended with this reassuring statement from the FSA: “We are doing some work into responsible lending, but we do not determine lenders’ panels.”
Although we would not want to see any external bodies dictating how lenders distribute their products, I actually agree that lender panels are likely to consist of a smaller number of large distributors in future. This is because we are witnessing a return to the sort of market conditions that nurtured the formation of a successful packager/distributor sector. We have gone through a period when volume was everything to lenders. In the drive for ever greater volume, lenders (some of whom have now exited the market completely) recruited very large packager panels and, in their quest for volume, sometimes quality became a secondary consideration. Now, this sort of market structure is being turned upside down and the current crisis is likely to affect most those packagers that were only ever in non conforming and those that do not work in true partnership with lenders.
When the market returns, packaging agreements will be much harder to obtain, and will only be handed out to substantial firms that can guarantee high quality as well as volume. Control will also play a much greater part in lender-packager relationships than it did in the past. For example, at PMPA, we foresee a future where lenders will allocate a tranche of funds to be distributed via members, with PMPA controlling the quality of cases submitted and the timescale for those funds to be offered as products.
Having acknowledged that times are tough, isn’t it always a good idea to “accentuate the positives”? Here at PMPA we have been thinking about the key messages that packagers need to express, so that both sectors – lenders and brokers – fully understand the value that packagers can deliver to them. Here are some views from a couple of PMPA members.
When if comes to the value delivered to lenders, Steve Field, a director at Niche Mortgage Solutions, says: “Even in these turbulent market conditions packagers continue to offer quality of applications are far higher than broker direct, resulting in higher offer rate. With limited lending targets it’s cheaper for lenders to access the market through packagers rather than go direct.” Chris Potts, managing director of Platinum Lending agrees that packagers are delivering value to lenders. His view is that “In this continually changing market place, by using our technologically advanced systems we have the ability to keep lenders advised of our current pipeline, which can help them to manage and reduce ‘spikes’ in volumes of business and maintain service standards”.
Regarding the benefits that the best packagers can deliver to brokers, Chris Potts goes on to say ” As a mortgage packager we have the ability to inform our introducers quickly of rapidly changing criteria, rates and product deadlines. To many brokers this is invaluable, in this unprecedented and volatile market place.” Steve Field backs up this view with evidence. He says “Brokers can access one system and source several lenders electronically and convert to application. Where else can brokers use one application form for multi-lenders and arrange re-type of valuations – many with no additional fees for their clients? The proof that brokers value packagers is in the fact that, since the credit crunch started, our enquiries have gone through the roof.”
I started with one news item and will end with another. Moneynet – the price comparison site for consumers – is reported as warning the public and brokers that lenders are rejecting out of hand any applications that are inaccurate and/or incomplete. What better time for brokers to capitalise on the current credit shortage by marketing their services to consumers, and then taking advantage of the speed and expertise that packager can offer?