Damian Cain is director of Complete Mortgage & Loan Services
The idea of a packager code has been around since it became clear that packaging – as an unregulated activity – would remain outside the Financial Services Authority’s regulatory control.
In August, we came close to getting a single code of conduct, which was being researched by the Intermediary Mortgage Lenders’ Association. But IMLA decided no single code could represent the differing strategies IMLA members have towards packagers. Intermediary lenders vetoed the move. There are different models for the different ways that lenders and packagers do business with each other, which would make it hard to frame one set of code of conduct rules but not impossible. Kensington has led the way and reopened the debate that the IMLA veto sought to close down.
With some pure packagers remaining an unregulated link between regulated brokers and lenders, it is understandable that lenders will wish to put on record their requirements for the way they expect packagers to conduct their business. Although a universal packager code of conduct would be simpler, I think we can expect to see more individual lender codes emerging before too long. In a sense, packagers already have sets of lenders’ rules which they have agreed to abide by in signing packager agreements.
Many lenders have already updated their agreements to be complementary to the FSA’s requirements and, even though the packager agreements are not labelled code of conduct, that’s what they amount to. I don’t believe any packager firm will raise objections to codes of conduct being drawn up by lenders – and this may in time lead towards a rethink by IMLA and the establishment of a single code.
Having packager codes of conduct – whether universal or individual – should be regarded as a helpful safety net, rather than a nuisance.
Keith street is director of sales at Kensington
The idea of a packager code was originally floated by IMLA in response to concerns about the activities of packagers after regulation. Because packagers would not be directly regulated by the Financial Services Authority, some parts of the mortgage industry felt there was a danger that packagers could stray into regulated areas of business.
If this happened, critics said that the regulator would penalise the broker or lender the packager was dealing with. This was backed up by research carried out by IMLA prior to Mortgage Day, which found that 63% of intermediaries believed packagers should be regulated by the FSA. A draft code was drawn up by IMLA, but it was not adopted by the body. Opinions of the continuing role of packagers in the regulated marketplace varied, with some lenders such as BM Solutions saying they preferred to deal with brokers direct.
Packagers were initially developed to serve the sub-prime sector, so as a non-conforming lender we had first-hand experience of the benefits good packagers can offer. Yet the concern over non-regulated packagers engaging in regulated activity still remained. So Kensington launched its own packager code of conduct.
The code was initially created for non-regulated pure packagers and reinforces the point that packagers not authorised by the FSA must state that they are unregulated and must agree not to engage in regulated activity. But the code also sets out the requirements for the quality of service Kensington expects. It covers areas such as monitoring and compliance, dealing with complaints and training. All the packagers we work with are now expected to sign up to the Kensington Code of Conduct.
Whether other lenders follow our example is likely to depend on how much they value the contribution that packagers make to their business.