Packagers are now widely recognised as mortgage ‘distributors’. This focus on the outbound flow of products to borrowers is quite correct. Nevertheless I am becoming increasingly concerned that the balance has tipped so far over towards highlighting the ‘distribution’ function, that packagers may be prone to neglecting another important message to both lenders and brokers. This is the ‘where it all started’ message about experience, expertise, ability and service.
Packagers add two-way value to the mortgage lending process. First, we aid with the design of lender products knowing what the current call is in the intermediary market, and we prepare and market to these needs. We source choices for the selling intermediaries, providing them with options to consider for their clients. We then take, filter and resolve any issues around the case, often finding they only exist because the information initially proffered is not actually the same which arrives with the case papers. It is only at this stage, when the package is ready for offer, that lenders receive the business from us with 80% of their work done for them.
A number of lenders argue that dealing direct with brokers will save them substantial administration costs. However, those lenders fail to recognise that as much as 85% of packaged applications go quickly to offer and most complete, whereas less than 50% of direct submissions get even to offer. Yet, to support the direct distribution route, the lenders have had to assimilate the cost of the market research, product design and marketing – to say nothing of maintaining armies of business development managers to keep in contact with the brokers and stimulate all those broker-direct sales. There are some top-flight BUMs out there but I question their true benefit to lenders when you consider the number who will be, at any one time, on holiday, on a course, away ill, in-house to help with the ‘catch up’ or simply acting as telephone fire fighters.
It is now time to start tipping back the balance, and package associations and all packagers can begin doing this in their communications with lenders and brokers.
First, the core message to brokers is: If you use a package, your case has a far higher chance of completing and, if it meets an obstacle, the packager is normally waiting in the wings with new options of lenders that are likely to be able to help. You are almost certain to get your procuration fee sooner, because packaged cases complete faster and in greater number. Therefore, you are likely to be paid on a far higher percentage of completions than if you submit all your cases direct to lenders – 85% versus 50% equals a no brainer!
Next, the consistent message to lenders is: if you make it worthwhile for packagers to distribute your products, you will reap huge benefits in quality of cases submitted to you and your ability to complete higher business volumes as a result. Far from the package route being more expensive than broker-direct it could save many of the direct distribution costs outlined above and considerably mitigate your package costs.
Lenders that value packagers will be the ones recording higher turnover, lower acquisition costs, and increased profits in future.