A major lender is in the advanced stages of revolutionising the way it pays proc fees, potentially sparking a radical overhaul of intermediary remuneration.
Mortgage Strategy understands the unnamed lender will pay proc fees to brokers based on the quality of business they submit.
It has developed a metric to assess different elements of brokers’ business, such as the quality of the cases they submit, how they interact with clients and their overall conduct.
This means brokers will be assessed individually rather than on the club or network they belong to and distributors might not be able to negotiate proc fees on volume alone.
The lender is thought to be making the move because of the changes in the incoming Mortgage Market Review and believes other lenders will follow in its footsteps.
Robert Sinclair, director of the Association of Mortgage Intermediaries, says brokers could soon have to choose one club to distribute the bulk of their business.
He says: “Many lenders still want volume business but at the same time they want to ensure it’s of sufficient quality.
“We’re in an interesting space where lenders are assessing how to get the type of business they want. So I think we’re going to see change over the next 12 months and which way things go will depend on each individual lender.”
John Malone, executive chairman of PMS, welcomes the changes saying clubs could adapt to suit lenders.
He says: “Businesses like ourselves have client management systems and we are able to select certain businesses for certain deals.
“If a lender came to us and wanted to lend in a particular postcode we could do it. We could also differentiate on quality of business. Until recently lenders were only interested in volume but now they have to satisfy their risk departments more.”
Richard Farr, director at Telos Solutions, says networks and mortgage clubs already assess the quality of their members.
He says: “In principle it is a more sophisticated option and could be a win-win for brokers, clients and lenders. The concept is good but in practice brokers could be paid lower fees. There is also concern about how consistently such a metric is applied and how judgements are made.”
He adds that lenders should not use the move to lower proc fees and that current levels should act as a average, with better brokers receiving more.