Brokers and lenders are locked in a marriage that is mostly happy, but what are the bad habits of lenders that drive intermediaries to distraction? We reveal brokers’ greatest bugbears
Most of the time, brokers and lenders are brothers in arms, happily working together to achieve the dream of home ownership for clients.
Well, that’s the theory, anyway – but it isn’t always the practice as sometimes lenders can drive brokers crazy with their annoying niggles.
It can be as mundane as a BDM not picking up the phone or trying to deal with a foreign call centre. Or it can be as brazen as dual pricing or the withdrawal of a headline rate with two hours’ notice.
Clients usually blame their broker when things go wrong so lenders’ service directly reflects on the reputation of intermediaries. So we spoke to brokers to find out what really ticks them off about their lender partners.
The price is not right
It’s no surprise that dual pricing is lenders’ most annoying habit for many brokers, as it’s usually nothing more than a naked attempt to cut out brokers. Most advisers accept commercial realities and realise lenders will choose what is best for their business. But what gets up brokers’ noses is when the differences in rates are huge or the criteria are more lax when clients go direct.
Dev Malle, sales and marketing director at Personal Touch Financial Services, says it is overzealous dual pricing that is the main concern.
“Most brokers understand exclusives work on both sides but when you get pricing differentials of 0.9% or more through retail branches it is a concern – especially when you know the cost of acquisition doesn’t stack up against the intermediary business,” he says.
David Hollingworth, mortgage specialist at London & Country, says most brokers recognise that there will be different product offerings through different channels.
“But when the product is identical except for the price, it remains difficult for brokers to see a joined-up partnership with the lender,” he says. “Some lenders, such as Coventry Building Society and Woolwich, have made the fact that they do not dual-price a key part of their message and deserve their plaudits.”
Northern Rock, soon to be Virgin Money, is another lender that does not dual price, although some attribute this more to the way its system is configured.
ING Direct has begun to use brokers as it has accepted that it can’t do the volumes it wants direct.
And Metro Bank is audaciously trying to drum up business via brokers without paying a proc fee.
Despite this, Ketan Yadav, broker at Avenue & Finance, believes dual pricing is rampant.
“Almost all the major lenders do it and some relax their criteria in branches too,” he says. “We had a client who was refused a mortgage by a lender when we tried to get the case through but then succeeded when he went direct to its branch.”
Laurie Dymock, a broker at Blue Sky, says direct-only deals can undermine the broker-lender relationship.
“Most brokers feel they are being pushed to one side,” he says. “Although this may not be the case, it can be the perception. Some products will be a loss leader to attract new customers and would not warrant enough profit if rolled out through brokers, but unfortunately it doesn’t improve the relationship.”
Ian Wilson, head of sales at Halifax, says it takes differential product pricing seriously and tries to be competitive both for brokers and branches.
“We price in line with the market, and sometimes that means there’s a discrepancy between products available in branch and through a broker,” he says. “Sometimes it’s in the broker’s favour and sometimes it’s not. When it’s to their detriment, we will always look closely at it.”
What’s yours is mine
In a similar way to dual pricing, some brokers accuse lenders of effectively trying to take away their clients once they have been introduced.
This can manifest itself in cross-selling insurance policies directly once the business is placed, for example, or trying to obtain the remortgage business. Brokers are primarily introducers so they rely on the good faith of lenders to continue to consider them once the business is placed.
Malle says some lenders break the rules and try to take customers directly, cutting brokers out of the deal.
“This includes the waiving of early redemption charges and offering customers under-the-counter deals to cut out the intermediaries who initially introduced the business,” he says. “This does not even give brokers a chance of competing.”
He adds that cross-selling at the point of new business placement can be especially frustrating.
“Some of us even understand that clients are shared once the transaction has taken place but at the point-of-sale it is a bit naughty, especially when lenders consistently tell us they have agreed not to do it,” he says.
Hollingworth says lenders do not involve brokers when trying to retain clients but they should.
“It’s a shame most lenders do not recognise the role of brokers in retaining clients and enable them to be involved and even rewarded in any product switch.
“Failing that, it’s helpful if lenders are clear on exactly what clients may or may not be offered a mortgage rather than employing a cherry-picking exercise dependent on the customer profile.”
Mind your language
Dealing with foreign call centres has come up repeatedly in discussion with brokers. The issue is not that the call centres are located abroad but rather that their staff are ill-equipped to deal with broker or client requests.
Brokers claim this is because they struggle with English and don’t understand the mortgage market.
Lea Karasavvas, broker at Prolific Mortgage Finance, says international call centres are as painful as banging your bruised head against a pebbled wall.
“In the current climate, the job is hard enough as it is, preparing all the relevant documentation for underwriters at their request,” he says.
“But when this task is passed on to someone who barely has a grasp of English, it becomes nearly impossible. Communication is key in the current mortgage industry so speaking to someone who can’t speak English will never lead to any service awards.”
Dominik Lipnicki, director of Your Mortgage Decisions, agrees that some overseas telephone staff are not capable of dealing with cases.
“Too many lenders still use foreign call centres manned by staff that may not only struggle with the language but have only a basic knowledge of mortgages,” he says.
“The way our clients are treated is obviously vital to our business and unfortunately this can often reflect badly on the client’s new lender early on in their relationship.”
Please leave a message
If brokers feel annoyed when talking to someone who can’t speak English then imagine their frustration when they can’t contact anyone at all.
It is inevitable BDMs will be unavailable on occasion but it doesn’t make it any less infuriating when a case needs to be done and brokers can’t get hold of their primary lender contact.
Kevin Duffy, managing director of Mortgageforce, says he is often left frustrated when greeted by the answerphone of a BDM.
“Bizarrely, it only seems to happen when you have a problem with a case that you need to talk to a BDM about,” he says. “Fortunately, BDMs are always looking to improve methods of contact as they understand that a BDM is one of the most important weapons a broker has in the current climate.
“Text, email, phone or even Twitter mean it is a rarity but there are still BDMs who will never answer your call, never reply to an email until out of hours, when nothing can be done, and never come out to see you. We are all in this together, so BDMs and brokers should be united to work together to get cases through.”
Aaron Strutt, head of communications at Trinity Financial Group, says simply finding a telephone number for lenders can be difficult when communication breaks down.
“Some lenders make it tricky to find a telephone number on their website – although it is good that we are seeing more communications through online chat systems,” he says.
Technology has played a major role in the communications revolution, with the internet in particular reducing this source of frustration. NatWest made LiveTALK its primary channel of communication in May last year but it can still be contacted by phone for brokers to track cases post-submission.
“If there are any pre-submission queries, we suggest using LiveTALK,” says a NatWest spokesman.
“All questions go through to professionals, who can provide links to sections of the website and provide a transcript of the conversation so there is no need to make notes.”
There is nothing worse for a broker than spending time with a client highlighting the benefits of a particular deal, only for it to be pulled without notice.
Karasavvas says it is his biggest gripe with lenders, dubbing it the curse of the late rate pull.
“You spend all week preparing your fact-finds and Key Fact Illustrations, send your clients away to consider the recommendation and pat yourself on the back for your compliance adherence,” he says. “Then it comes, as welcome as wind at a funeral, the email that says ’due to the high demand, the products will be withdrawn at 5pm’.
“The email hits your inbox at 4.17pm. There is no chance of the deal going through – the lender knows it, you know it and your client thinks you are incompetent. There is nothing worse in the industry than the curse of the late rate pull.”
The chief gripe of late pulls is that they are made to fit entirely with a lender’s product department and with little thought for the impact on brokers. The decision is usually made on the basis of fluctuating swap rates, dwindling margins or the simple filling of a tranche of funding.
Hollingworth says brokers recognise that it will be necessary occasionally but in most cases it is helpful to receive even a small amount of notice.
“It at least gives an organised broker the opportunity to secure a rate for one or two of their clients that may be on the verge of applying,” he says. “Most lenders do try to give as much notice as possible and at its peak this problem was caused by market conditions.”
Strutt echoes the sentiment, agreeing that it is a huge source of frustration to have the rug pulled from under your feet at the last moment.
“Brokers like to have more than a couple of hours’ notice before the rates are withdrawn, if possible,” he says.
Some lenders have better records such as Coventry Building Society that has pledged to give 48 hours’ notice before it withdraws rates.
The lender has taken some financial hit to fulfil the pledge and there have probably been occasions when it would have preferred to withdraw the product sooner.
While many brokers value client-facing time as the highlight of their job, there is still lots of document-handling needed for an agreement as important as a mortgage.
Today’s lenders demand mountains of paperwork, from payslips to passports, to process a deal. This means brokers must run an organised office and send full, accurate documents on time.
So it can be a source of endless frustration when it turns out lenders are not as organised and cause application delays.
“I find it baffling how often lenders lose client documents,” says Lipnicki. “It is nowhere near as rare as you would expect from lenders that are meant to adhere to the Data Protection Act.
“I also find it hard to understand why some lenders will issue an offer within days of submission, while others can often take months, with a constant barrage of new requests while our clients wait for the lender to honour the decision in principle that was obtained at the start of the process.”
Duffy says incidents of lenders losing documents are far too common but they don’t always admit to it and even try to pin the blame on brokers.
“This is becoming all too familiar,” he says. “You send a fax or an email with all the requested documents included, then a few days later the lender requests one of the things you sent again.
“Why? Because they didn’t receive it – even though it was sent with all the other documents that they did receive.”
Duffy says the only possible explanation is that it has been lost despite lenders claiming never to have received it.
“So you fax it again,” he says. “Another few days are lost in the 48 hours to process queue. Then, another item is requested that has already been faxed. Three faxes and six working days later, all the documents are received. The re-faxed fax is a new issue but if it carries on it could work its way up to next year’s Christmas number one.”
The situation is even more galling because of the number of documents lenders demand for each case. In recent years NatWest has given advice to broker firms on how to package documents for faster applications, improving its first-time success rate from 35% to 70%.
But Dymock says that if difficulties arise with a case, it can be impossible to get it back on track with big lenders.
“With small lenders you can usually speak to an underwriter, discuss the issues and try to resolve any problems,” he says.
“Unfortunately, this isn’t always the case with large lenders. While they may not have the resources or time to worry about the occasional case, every case is important to brokers.”
For the self-employed, the requirement for documents is even more acute after self-cert was vilified because of a lack of income checks.
Some brokers now believe the pendulum has swung too far the other way and that self-employed mortgages are now a major issue.
“The biggest issue is the amount of information lenders need for self-employed applicants,” says Yadav. “It can take three months to get a self-employed case looked at and by this time many clients have lost their property. We have lost customers because of it when the deal didn’t go through.”
With lenders clamping down on criteria and the latest proposals of the Mortgage Market Review, the issue of document handling is set to become even more crucial in coming years.
It’s going down
Many brokers find it incomprehensible that there can be such variation of property prices among different valuers.
And borrowers can see the value of their house reduced by over-pessimistic valuers or even pushed up beyond what they can afford.
Lipnicki believes down-valuations are a major issue and there is little recourse to appeal when the valuer is wrong.
“Many of our brokers also find that lender valuations can often be overly pessimistic, with little room to overturn a wrong decision,” he says.
“Having an unjust valuation may mean an unnecessarily high interest rate or not being able to take up the mortgage in the first place. The problem is compounded as some lenders have a non-refundable fee.”
Lipnicki is not alone and Karasavvas says inaccurate valuations are a pet hate for brokers, singling out the Halifax Valuation Index.
The Halifax system is intended to help borrowers avoid paying for a valuation by using regional house price data with the latest valuation of the security to estimate the value.
Borrowers can appeal against the decision and pay for a revaluation if they disagree with the result of the index.
But Karasavvas says that sometimes the figure is so far out that “you think they have valued the wrong house”.
“The problem here is that the only way the figure can be amended is by getting your client to pay for a valuation,” he says.
“These unrealistic valuations financially disadvantage clients and can make a difference of 0.2 or 0.3% in the rate they pay. The clients have no option but to pay for a valuation from the lender to prove that the lender’s valuation index was inaccurate. Some kind of comparable evidence should be applied here without a cost to clients.”
In September last year, at a Mortgage Strategy round table on new-build property with Nationwide Building Society, the primary issue for brokers was pessimistic valuations.
The bone of contention was that Nationwide valued new homes on their resale value, causing them to be worth less than they would if they were new.
Brokers were unhappy and some claimed to avoid Nationwide because of its policy. But in November last year, the mutual changed its policy and instructed valuers to assess properties on their new value, rather than on their resale value.
The debate and response from Nationwide demonstrates the prominent role valuations play and how annoying it can be.
With house prices so important to prospective borrowers, it is not a shock that pessimistic valuations create bother for brokers.
Yes, no, maybe
The mortgage famine has seen the market crash from £360bn gross lending in 2007 to an expected £130bn this year.
Borrower confidence has plummeted to incredible lows as the criteria noose has tightened round the neck of prospective home owners, affecting demand.
Brokers accept market realities but the tough environment means little niggles over criteria become all the more frustrating.
One issue is when lenders release a headline, best-buy product for which almost nobody can qualify.
“In a market that is facing so many challenges, it is always good to see new products being launched,” says Hollingworth. “No-one expects criteria or credit scoring requirements to be slack but there’s nothing more frustrating than good quality customers being knocked back as a result of a very high scoring requirement.
“Other lenders, like Skipton Building Society when it launched a 95% LTV deal, have been clear that there will be a demanding score necessary to qualify. It’s all about setting expectation.”
Malle agrees that communication over criteria is crucial and is not always up to scratch at the major lenders.
“Most lenders operate a scorecard that decides whether a case is accepted or not but these cards are tweaked depending on the lender’s risk appetite,” he says.
“In theory, an applicant accepted one day could be declined the next if the scorecard parameters have been adjusted.”
Lipnicki adds that inflexible underwriting is a problem and good cases can be refused on technicalities, rather than common sense applying.
Inflexible underwriting extends to specific areas, with interest-only singled out by brokers as an area of disinterest to lenders.
Since the MMR, lenders have been under pressure to restrict interest-only deals but Strutt argues that the door has been shut on all borrowers without 25% deposits.
“Brokers would like lenders to provide more interest-only options for borrowers, especially if they are buying a home for the first-time,” he says.
The swing of the pendulum towards stricter underwriting has also had an impact on lenders’ desire to tackle mortgage fraud.
In the years of plenty the odd fraud case was barely worth pursuing as lenders chased more business, but that has changed.
Lloyds Banking Group has kicked more than 100 brokers off its panel in the last couple of years because of fraud concerns.
Meanwhile, borrowers are coming under more scrutiny and more are rejected when lenders suspect fraud.
This can be even more frustrating for brokers because antimoney laundering regulations mean lenders cannot always give borrowers reasons for the rejection as it could amount to tipping off.
Malle says it is not as common as the other issues but the number of lenders that blur the quality of submissions with financial crime is concerning.
“Clearly the latter is serious and should result in termination but there are times when it is not financial crime or fraud and lenders point to poor quality, which was driven by their own criteria or sales team,” he says.
Too hot to handle
Brokers love headline deals as much as anyone and there are always supportive comments on Mortgage Strategy Online when lenders launch market-leading deals.
But this support can soon turn into frustration if lenders cannot cope with the volume that an eye-catching rate can bring.
Woolwich was caught out when it launched its 75% LTV deal late last year but had service issues with the level of business it received.
Its buy-to-let system crashed for a few days earlier this month but this was the result of a technical issue rather than problems related to volume.
Other lenders have also provided slow service that can badly impact the reputation of brokers with their clients.
Hollingworth says some lenders actively decide to pursue volume at the direct expense of service.
“It is not a new thing and is less prevalent in a market where tight volume management is often the name of the game,” he says.
“However, there are still times when lenders will become a victim of their own success and attract a lot of business in a short space of time,” he says.
“Good products are what brokers are crying out for but there is a balance, and not acting on the signs can lead to a miserable period of processing delays and service issues.”
Dymock says slow service is the biggest headache for brokers, and lenders don’t seem to care about the damage it does to brokers’ reputation.
“Most brokers take pride in the service they provide to their customers and feel let down and frustrated when the lender’s poor work ethics reflect badly upon them,” he says.
“This can be evidenced when lenders roll out a market leading rate to ramp up business but fail to deal with the increase in volume. It clearly leads to frustrated clients and does not lend itself to treating customers fairly, especially when cases do not get assessed for days or even weeks.”
So clearly there is plenty here for lenders to digest if they want to address some of the intermediary market’s concerns.
And there are clearly examples of good practice, such as Woolwich on dual pricing, Coventry on late rate withdrawals, Nationwide on valuations and NatWest on communication.
Brokers and lenders are in a marriage and sometimes a bit of honesty can help rekindle the love.