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Network Data Holdings: IT pipe dreams of packagers

Packagers find themselves on crumbling ground as advancing mortgage applications processing technology eats away at their historic added value service. And any idea they could produce a mortgage sourcing system to compete with the likes of Trigold is doomed

In October 2006 Mortgage Strategy published a supplement entitled “Packaging, adding value”.

As part of a comprehensive survey of what brokers think the future holds for packagers, 90% of the brokers that responded said they did not think packagers would be around in 18 months’ time.

I attended the Packager Summit 2007, at the end of January in Nice, where the atmosphere could only be described as buoyant, upbeat about the future, and full of bonhomie.

At the conference sessions, Phil Jenks of Halifax Bank of Scotland made it quite clear that he regards packagers as being a distribution channel, not an outsourced service for the processing of mortgage applications. In other words, packagers should forget “shuffling around bits of paper”, as described by John Rice, managing director of the Regulatory Alliance of Mortgage Packagers, as their raison d’?e.

The rapid advance of technology with near instant online decisions-in-principle and mortgage offers continues to cut the ground away from packagers’ historic added value service of processing mortgage applications.

Kevin Patterson of Park Row Associates, writing in the Febuary 2005 edition of Mortgage Strategy said packagers were approaching a critical point, walking a knife edge between success and failure and that there was a massive opportunity for those packagers that embrace technology.

Nearly all packagers use some form of in-house case management software, either proprietary or bought-in. One of the lenders at the Summit commented there are 78 different systems in use by packagers.

This remark was made in reference to connectivity between packagers and lenders systems, and the stark message was that lenders will not invest the time and money to connect to 78 different systems.

Some packagers are making their IT systems accessible to the wider broker market as a non-conforming sourcing facility. These include Primrose with its e:valuate system and Enterprise Group with its Edge system.

These systems may be regarded as an interim solution to fill the hole created by the inadequacy of the mainstream sourcing systems, Trigold and Mortgage Brain, to provide a comprehensive and accurate sourcing system for non-conforming mortgages.

However, I had the distinct impression that the packager community felt it could collectively produce a robust and comprehensive mortgage solution which would replace Trigold et al. Indeed, Rice called on lenders to fund such a development.

While Michael Clapper of Enterprise claimed to have spent more than 1m on the Edge system, the bar chart shows The Mortgage Businesss research into the expected spend on technology by packagers. During managing director of TMB, Nigel Paynes presentation at the Summit I queried the horizontal scale of expenditure did that start at 200 or 200,000.

The answer was 200. Network Data has just spent more than that on two anti-static mats for its server room, while our total IT expenditure exceeds 100,000 per month.

Look at the figures. Do you think the packager community is likely to develop a full-blown mortgage sourcing system to compete with Trigold? Dream on. Theres more chance of Michael Bolton being elected as the packagers champion, another one of the proposals raised at the Summit.

My own prediction for the future of packagers? The Packager Summit in 2008 will be as equally as buoyant as in 2007. By 2009 the cracks will be appearing around the edges and the smaller, weaker, cheaper packagers will be a rapidly dwindling breed.

Within a year or two after that, the event will be renamed the Mortgage Distributors Summit. You read it here first.


By Richard Griffiths
Chief Executive
Network Data Holdings

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