As we leave the month of June behind it is probably a good time to have a look at the year so far. A few observations to start with. The year started with lenders embracing packagers like never before.
In fact many commentators made brave headlines saying that packagers/distributors had come of age. I have to say this made me chuckle. It certainly wasn’t the distributors that had come of age – more like the lenders which had ‘woken up’ to the fact that packagers controlled distribution.
On top of that, new style lenders have been emerging in never-ending launches, bringing to market a choice of alternatives at a level that far outreaches anything our mortgage industry as seen before. Lots of choice, lots of options and, for some new lenders, lots of costs to recoup as they throw out crazy low margin products in order to build balance sheets. Still, the market was buoyant and I guess they could see no risk in the ‘stack ’em high and sell ’em cheap’ launch process.
I am under no illusions that, in time, the embracing will stop, particularly as lenders develop direct to broker propositions. Margins are extremely tight and I believe most lenders will drop distributors as soon as they are in positions to do so. And, let’s face it, the advent of smart technology could well give them the opportunity. That said, many lenders are in it for the long haul.
Most alliances have relationships with a large panel of lender partners. The question is, do we deal with all of our lender partners in the same way, or do we have closer relationships, with a select number of lenders where we can genuinely work together to enhance the added value to our lenders but also to our supporting brokers.
A strategic partnership involves the distributor understanding the lender’s business plan, its ability to offer competitive rates and the need not to compromise on its credit and risk requirements. Such relationships have to be long-term and again, I would be surprised if all of our lenders are looking for long-term relationships.
With that in mind, I have for the past six months been talking to our lender partners outlining our strategic vision for genuine two-way growth. This started with an internal project to see what the Association of Mortgage Packagers and Distributors needs to do and then come up with a menu of commitments that we will make to our premier lenders and in return the commitments those lenders will make to us. At this point we are in the final stages and all I will say is that our premier lender panel is unlikely to have more than 10 lenders that will qualify.
Clearly we have relationships with many more lenders than the 10 that will be offered premier status. I am sure many commentators will be surprised that many ‘big name’ lenders will not be on the first premier panel. We accept that many are unable or perhaps not willing to commit and we will still deal with those lenders that will be on our standard lender panel. It is my hope that some of these lenders will, in time, aspire to our premier panel and in due course enjoy the two-way benefits that we believe will be visible.