There has, in general, been a lack of interest by lenders in investing in any of the mortgage distribution channels – business to business mortgage networks, clubs, packagers or business to consumer mortgage intermediaries.
A few lenders have invested in distributors, but these have generally been outright purchases rather than minority stakes. Kensington bought (and sold) The Mortgage Lender, while West Bromwich bought the franchise operation MortgageForce.
Recently it was reputed Cheshire Building Society entered into the due diligence stage of buying Prestbury Holdings, a network with around 110 appointed representative firms. Prestbury is a quoted company on the Alternative Investment Market and had previously been acquisitive, snapping up the Blue Pearl mortgage network in 2005.
Since its flotation in 2003 at 80p, Prestbury’s share price has had a rollercoaster ride, peaking at 108p, bombing to 10p, before settling in the trading range of 20-30p. However, the prospective takeover talks were terminated and the price dwindled to 11.5p.
But two noteworthy deals have completed recently. GE Money Home Lending took a minority stake, believed to be 20%, in Solent Mortgage Services. Solent will retain its relationships with other lenders and will not be tied to just GEMHL products. Paul Robinson, chief executive officer of SMS, commented: “Our closer relationship with GEMHL will help us execute better on the delivery of key improvements in working with all the major lenders in this sector and Europe. This will accelerate our development plans and help us gain access to European markets.”
The other deal is Promethean Investments, which spent £8.5m to acquire a 30% equity stake in Enterprise Group, including its subsidiaries Enterprise Broker Services, Enterprise Finance, Enterprise Debt Solutions, Enterprise Partners, Enterprise Homeloans, Choice Homeloans, Mint Homeloans, Thinc Enterprise, Enterprise Wills and its EDGE sub-prime sourcing system.
Michael Clapper, chief executive of Enterprise, says the development of his new IT platform led him to seek out potential investors last summer because of the cash required to develop the technology fully. It seems to me that with Trigold having spent its way through £32m of shareholders’ money, Enterprise still has some way to go.
Promethean is chaired by Sir Peter Burt, former governor and group chief executive of Bank of Scotland and ex-chairman of ITV, and has become Enterprise’s non-executive chairman.
The EDGE system was launched in May 2006 and, it is claimed, provides the first accurate and dedicated sub-prime sourcing system. It also provides an instant audit trail to demonstrate that thorough research has been carried out prior to recommendation. Version 2 of EDGE, which is fully integrated with many of the specialist lenders’ systems, is about to be launched.
Burt comments: “Enterprise stood out as a shining example of how a mortgage and loan distribution company should be evolving in the regulated environment. Every box was ticked for us, and we are very excited about working with Michael and his team to maximise on the vast opportunities we see in this market. The EDGE technology is the first true sub-prime sourcing system we have seen that offers full regulatory protection and best execution for its users.”
I have in the past predicted that when a major lender starts to buy a stake in a major distributor, followed by another major lender or two, that there will be a stampede of the ‘me too’ brigade of those afraid of being left behind. I think it is too early to call whether this buying movement has really started to happen. But watch this space.