Packager Power

Proc fees should reflect the work involved in placing cases. Sub-prime deals attract high fees due to the amount of work required, but are these still justified given advances in technology and the number of cascade systems now available?

Simon Mouncher is operations director at em-financial

Higher proc fees for the sub-prime market are still justified. While it is true that there have been great ad-vances in technology, I don’t believe this justifies a reduction in fees for several reasons.

First, there has been the introduction of a number of new lenders and therefore more products on the market which has created a competitive lending market. Thus, packagers and brokers should not be penalised for using technology with reduced proc fees since they have little choice but to use technology in today’s di-verse market.

The role of packagers involves more than just processing deals. The amount of effort needed to market products has increased due to variations in rates, fees and LTVs, hence the need for proc fees.

One of the difficulties facing packagers and brokers is that lenders keep undercutting each other and offering deeply discounted products, so the proc fee is becoming an in-creasingly important extra for brokers and packagers.

Indeed, many packagers use technology that can compete with len-ders, which allows them to attract business in the first place. Proc fees are incentives for brokers and packagers and there is no justification for reducing them.

This could only have a negative effect and might even damage the sub-prime sector, as packagers and brokers would have to recover costs elsewhere.

James Watts is director of Proactive Mortgages

Higher proc fees paid on sub-prime mortgage applications are still very much justified, regardless of the im-provements in technology and cascade systems we have seen in recent years.

In my experience, brokers prefer to deal with efficient and professional packagers as each case can be verbally discussed in full at the outset, thus en-suring a smooth process which usually concludes in speedy offers being produced and satisfactory products for brokers’ clients.

We pride ourselves on our professionalism and broker support because we monitor all our cases from receipt through to assisting solicitors with completions.

This allows our brokers to concentrate on new business and they can rest assured we are working behind the scenes to guarantee cases proceed as quickly as possible.

While advances in technology have helped us all, these have to go hand-in-hand with dedicated packaging skills and personnel.

I don’t think proc fees should be re-duced because packagers still carry out the same amount of duties per case as they did prior to any improvements in technology.

Packagers fulfil an important function in the mortgage process, working closely with their brokers and lending partners to provide well presented app-lications for underwriters. This pro-cess avoids any unnecessary delays which would otherwise have an ad-verse impact on lenders’ staffing levels and costs.

Nino Cuffard is managing director, Mortgage Finance Corporation

The volume of business that goes through the intermediary channel shows advice from brokers is valued in today’s market.

Remuneration should reflect the amount of work required on cases and it is usually niche products that require most work – sub-prime deals in particular.

With all cases, this work includes sourcing, arranging decisions in principle and tracking cases through to completion and beyond. And that’s without mentioning the sales process and compliance requirements.

With sub-prime deals, this goes one step further in that a packager almost takes on the role of being a branch for each lender.

Referencing and instructing valuations may seem straightforward tasks but packagers are responsible not only for the execution of these tasks but the manner, speed and efficiency with which they are done.

Brokers and packagers today do far more work and take a lot of work away from lenders, allowing them to concentrate on delivering efficient service, competitive products and speedy offers for customers.

Technology helps us to provide better service but ultimately costs money. And cascade systems, while saving time in terms of re-keying, do not necessarily reduce the amount of work required. Reduced proc fees are likely to mean more brokers charging or increasing their fees for sub-prime business.