You don’t need to have been in this industry long to remember being told the future of packagers was shaky, to say the least. Where would they fit within the new regime of lenders dealing direct with intermediaries, supported by revolutionary IT systems – and what benefit could they bring?
In some sectors in the prime end of the market, this clearly has credibility – but let’s look at this logically. Although an online system may enable a client to be cascaded from a near prime product to a sub-prime offering with the same lender, this may well not be in the client’s best interest when different underwriting criteria could mean a significantly better deal elsewhere.
This puts the onus back onto the broker to ensure the deal is re-sourced, often based upon limited knowledge of the client’s full credit status. In the spirit of treating cus” The next flavour of the month could well be ‘super-associations’, with a tiered structure catering for a wider segment of the market”tomers fairly, are we sure all options are being explored?
So the challenge for packagers going forward must be both in terms of offering a wide panel of lenders and robust procedures to ensure the best available deal is offered in all cases. This can become a juggling act when maintaining a large lender panel and ensuring best advice as we move towards an increasingly regulated regime.
The costs of IT and compliance will continue to affect packagers across the board, in my view giving packager associations an increasingly important role. Combined buying power comes into force, not just in terms of exclusive products negotiated with lenders, but also back-office and point-of-sale systems that are ever more essential in our marketplace.
Integration will provide a seamless transfer of data to whichever lender is able to provide the most appropriate deal for the client. While this is necessary, it may not be a financially viable option for smaller packagers.
Until very recently the established associations have been an exclusive club, accessible only to those producing significant volumes. There are still some very good medium-sized businesses which provide high levels of service to their brokers and clients, and the formation of Freehold was very much targeted at this sector.
It is interesting to see the Regulatory Association of Mortgage Packagers is now recruiting associate members and perhaps this is an indication of the value that can be brought to the table by mid-sized players.
So is this the way forward? Maybe, although I am convinced we will see casualties among those businesses left out in the cold who simply do not have the buying power and economies of scale to compete.
We are all used to the term ‘super-packagers’ – the next flavour of the month could well be ‘super-associations’, with a tiered structure catering for a wider segment of the market dependant on the nature, size and requirements of its individual members.
This may well not be a winner with some lenders, who see associations and their combined buying power as a necessary evil – but by definition, this provides a distribution channel that can only be in the best interests of the client.