Cascade systems slammed

A small packager has slam-med lenders’ cascade systems for offering no incentive to packagers looking to place prime business.

Paul Suchet, director of Alexander Finance Services, says he’s fed up with losing business when sub-prime cases are cascaded up-wards to prime because the client’s case is referred back to the broker who then app-roaches the lender direct.

He says: “As packagers, why are we allowed to package sub-prime but not prime with the same lender? Surely the qualities needed are the same for both types of products. Or is sub-prime a second division product?”

But industry pundits say the idea is uneconomical and impractical.

Roger Morris, managing director at em-financial, says: “With clean prime products there’s no need for packagers. It’s not worth it and we won’t get much money for prime cases. If we can’t get our hands dirty we don’t want to get involved as it might be making money under false pretences.”

Optoma Broker Solutions is a packager that deals with prime and sub-prime and says that although prime is not a highly profitable business, it increases distribution.

Harpal Singh, operations director at Optoma, says: “The difference with prime is the lower margin. Most prime lenders have simple products and a robust service proposition so a packager may struggle to add enough value to a broker.”

Linda Will, managing director of Accord Mortgages, says: “The bottom line with prime business is that there is not enough fat in it to feed an extra mouth. We will offer the packager a prime rate if a case is cascaded from sub-prime to prime but this would only average around 35 basis points and most packagers would say it’s not worth it.

“The packager would not make enough and the broker would probably prefer to approach the lender direct.”