View more on these topics

Proc fee revolution on the cards

A major lender is in the advanced stages of revolutionising the way it pays proc fees, potentially sparking a radical overhaul of intermediary remuneration.

john_malone.jpg

Mortgage Strategy understands the unnamed lender will pay proc fees to brokers based on the quality of business they submit.

It has developed a metric to assess different elements of brokers’ business, such as the quality of the cases they submit, how they interact with clients and their overall conduct.

This means brokers will be assess–ed individually rather than on the club or network they belong to and distributors will not be able to negotiate proc fees based on volume.

The lender is thought to be making the move because of the changes  in the incoming Mortgage Market Review and believes other lenders will follow in its footsteps.

Robert Sinclair, director of the Association of Mortgage Intermediaries, says brokers could soon have to choose one club to distribute the bulk of their business.

He says: “Many lenders still want volume business but at the same time they want to ensure it’s of sufficient quality.

“We’re in an interesting space where lenders are assessing how to get the type of business they want. So I think we’re going to see change over the next 12 months and which way things go will depend on each individual lender.”

John Malone, executive chairman of PMS, welcomes the changes saying clubs could adapt to suit lenders.

He says: “Businesses like ourselves have client management systems and we are able to select certain businesses for certain deals.

“If a lender came to us and wanted to lend in a particular postcode we could do it. We could also differentiate on quality of business. Until recently lenders were only interested in volume but now they have to satisfy their risk departments more.”

Richard Farr, director at Telos Solutions, says networks and mortgage clubs already assess the quality of their members.

He says: “In principle it is a more sophisticated option and could be a win-win for brokers, clients and lenders. The concept is good but in practice brokers could be paid lower fees. There is also concern about how consistently such a metric is applied and how judgements are made.”

He adds that lenders should not use the move to lower proc fees and that current levels should act as a average, with better brokers receiving more.

Recommended

John Malone

Proc fee revolution on the cards

A major lender is in the advanced stages of revolutionising the way it pays proc fees, potentially sparking a radical overhaul of intermediary remuneration. Mortgage Strategy understands the unnamed lender will pay proc fees to brokers based on the quality of business they submit. It has developed a metric to assess different elements of brokers’ […]

Approvals tumble to 43,450 in March

Mortgage approvals for home purchases fell sharply to 43,450 in March, their lowest level since December 2010, according to e.surv’s latest Mortgage Monitor. There were 7% fewer purchase approvals than in March last year – the first year-on-year fall since May 2011. With an 11% drop in February, it is the second successive month in […]

Caption Competition

Fluent Money’s Tim Wheeldon gears up for the first leg of the UK Saker Sportscar Challenge

Newsletter

News and expert analysis straight to your inbox

Sign up
Comments
  • Post a comment
  • johnluisaidan 22nd September 2012 at 12:29 pm

    Hello,i found your site through search,yours blog is excellent and a nice site…

    The contents are nice &will grow higher in future…

    thanks,

    http://www.citiwide.com.au/

  • We're all doomed!! 23rd May 2012 at 4:23 pm

    Forget about proc fees everyone – once the FSA has implemented RDR on IFA’s, and got that one out of the way, they’ll apply the same rules to non investment products, and everyone will need to charge fees.

  • julie quirk 23rd May 2012 at 2:52 pm

    In theory maybe a good idea but why complicate matters?? If there are brokers out there who are submitting business that doesn’t meet the quality the lender requires then why not pick up the phone and tell them. Sounds like just another way of squeezing our measily incomes!!!

  • Sandra mcwhirter 20th April 2012 at 5:39 pm

    If brokers packaged things right in the first place and actually looked at and read the documents that they sent then offers would be out quick!

  • Laurie 20th April 2012 at 3:04 pm

    Lenders judging a brokers quality – these are the people who can’t even get an offer out in a reasonable time ! Maybe the first part of quality control should be taking a good hard look at their own shortcomings before judging anyone else. Unbelievable.

  • johh smithq 20th April 2012 at 11:52 am

    lets face it guys, the banks and the public are turning away from us. if you want to earn 20K – 40K per year there are far less stressful ways of doing so. unless you own a business with several brokers underneath you there is a little point of this job now.

  • GHU 19th April 2012 at 3:16 pm

    Bobby, I thought you had left the industry a few weeks ago.

  • Jason Simpson 18th April 2012 at 3:23 pm

    This smacks of another means of reducing what brokers get paid by the lender. On what basis will the “quality” of the broker be judged? And will there be any reciprocal arrangement to improve the quality of the lender? If the lender makes a mess of processing (not unusual) will the broker get paid more?!?

  • john smith 18th April 2012 at 1:55 pm

    if the non-advised sales route is closed lenders will need to start thinking about using brokers more and how best to pay pro fees. this idea i think will be one of many.

    there appears to be new rules and terms coming out every other week affecting brokers. when you think about 5 years ago what was so wrong besides the loose lending criteria that lenders were promoting. i think lenders are thinking too short term, they will need us again in the longer term

  • Doctor S P 18th April 2012 at 1:19 pm

    Whoa there! Performance-related pay?? Who thought up this crazy idea???

  • Mike 17th April 2012 at 2:47 pm

    This sounds like a ‘silly idea’, given the light of day by sensationlist magazines.At this time, lenders are holding back on lending, (I just don’t think they have the money), but when they are back in the business of lending, they will have to pay a competitive proc fee or lose out!!! The proc fee is not a ‘gift’ but a fee for locating a borrower, pre-underwriting and advice for said borrower, packaging and moderating the process through to completion. It would be like going to your accountantant and saying “I’m reducing your fees, you do the same work but for less. Please don’t fall into the trap set buy these magazines as they have always floated these suggestions for whever to gauge reaction. Insist on receiving a fair days pay for a fair days work, after all, we save the lenders hundreds of millions in operating costs each year, only being paid for actual work done! Networks take note too and at your peril, allow this to happen without using your muscle and you won’t be a network for long if they feel they can pull your chain. You rolled over with RDR etc, don’t roll over with this.

  • Luke Atkinson 17th April 2012 at 2:46 pm

    @ anon 1.33 – I wouldn’t comment if I wasn’t prepared to put my name to it and I certainly wouldn’t comment if I was as ill-informed as you are.

    I keep a close eye on the mortgage industry as some of the advice my clients receive from me is linked in to the mortgage.

  • anon 17th April 2012 at 1:33 pm

    @ luke – you have a lot to say for somebody who is a waiter these days. I dont have a problem with guyds and girls in the trade as it were, but not those commenting on issues that they know little about. I wouldnt comment on which claret to have after all!

  • c jones 17th April 2012 at 12:51 pm

    is this really what we have all come to? arguing over 0.35%?. £350.00 on a typical 100k mortgage for all the work and responsibilty the broker/adviser has to do? A friend of mine makes more than that working a bouncy castle at the car boots on a Sunday. Earning a living being a mortgage broker? dont make me laugh.

  • Terry Young 17th April 2012 at 11:18 am

    It is simply too early to judge the impact and benefit on intermediaries without more information and I am surprised some of the larger distributors appear to have effectively given the green light by welcoming such a move at this stage – unless they have been fully consulted and made an impact assessment on the changes already.

    This is not only about the value distributors and networks add to lenders in terms of management information relating to product segmentation or firm profiling and market sectors.

    There are many other questions and potential issues. What criterion are to be used and over what period will be the assessment be made? How regularly will fees be reviewed and will they move up and down? Will there be additional proc fee bandings to reflect the new changes? Will higher proc fees be available to larger individual firms that can demonstrate meeting quality measures as well as deliver volume? What about firms who are long standing supporters and who have a strategy for growth and strong compliance and governance?

    If proc fees are to be assessed against quality and NOT volume at the individual firm level, what will the impact be on distributors and networks income?

    If volume assessment is no longer taken into account at the individual firms level, I assume aggregation cannot be used by distributors or networks anymore, meaning the effective death of volume aggregation at a stroke – a fundamental change for all distributors and networks, but can we really say volume no longer counts?

    A good percentage of firms now charge a broker fee and this is likely to increase over time. For distributors and networks who derive some if not all their income from ‘top slicing’ proc fees, they face a strong test of having to adapt their business models and value proposition to support firms through change over the next few years and having to address the challenge of sustainability from reduced incomes.

    The pressure on proc fees levels in the short to medium term will undoubtedly be downward. Let us hope that the effect of any change made is at the very least neutral on proc fee levels and that it is designed to genuinely encourage a focus on quality.

  • Luke Atkinson 17th April 2012 at 9:51 am

    This will see an overall reduction in the proc fees that this lender offers, guaranteed.

  • Sandra Mcwhirter 16th April 2012 at 5:51 pm

    Sorry but I have worked as a processor in a mortgage brokerage and as mortgage underwriter and the amount of cases where the brokers can’t get things right is unbelievable! How hard is collecting full 3 months bank statements or payslips! Very hard judging by the amount of cases that are not fully packaged! Seems like a good idea to me

  • Jon T 16th April 2012 at 5:26 pm

    Revolutions are usually extremely violent…

  • jules_lonond 16th April 2012 at 2:38 pm

    It never stops; I am getting out of this industry as it has become a joke. I can’t believe I am reading some brokers saying it is a good idea; Stockholm syndrome or what? What will the FSA have to say about this? Oh, it is a bank so it will say nothing…

  • Bobby 16th April 2012 at 1:31 pm

    Death by a thousand stabs this industry is now. A slow , drawn out and painful death for the intermediary sector.

  • David Taylor 16th April 2012 at 12:49 pm

    If any of you actually believe that this will benefit any Broker (however good you think you are) in the long term, you are either very naive or deluded.

  • YesAdam 16th April 2012 at 12:08 pm

    Broker can argue that all business is top quality, concidering it meets lenders specifications.

  • antony clegg 16th April 2012 at 11:40 am

    i am amazed how naive some people are. cant everyone see this is a back door route to reduce proc fees? there is no way that the max proc fee will exceed 0.35% and who will be the judge on the quality, the people paying? if you are on the list of top brokers what justification will they need to demote you? can we appeal? I can see this getting very messy.

  • Used and Abused Broker 16th April 2012 at 11:27 am

    totally agree with Les – 16 Apr 2012 11:09 am

    WHAT PROC FEE DO WE PUT ON A KFI?!!!!

    And doesnt this give the lender a reason to lower the proc fee at anay time?

    WHAT IS MEASURED TO GET THE RELEVENAT PROC FEE???

    It stinks of muck – and frankly spreading it on brokers faces who work hard to a) get the client b)give exemplary advice and servivce and c) put up with the monkeys who do the underwriting who often cant even read a set of accounts.

  • Tom Cleary 16th April 2012 at 11:20 am

    I think you have all misunderstood the term “quality” in this article. I will bet my house that “quality” means the sale of ancillary products such as current accounts and credit cards. Lenders are very keen to maximise multiple sales on mortgage transactions and we will be rewarded £50 for selling the client a current account. Watch this space…

  • john smith 16th April 2012 at 11:19 am

    it all depends what you mean by quality business. are we talking bout packaging a case / quality of client / LTV? is helping a FTB onto the property ladder in Middlesborough with joint incomes at 25K at 4 x income at 85% / 90% bad business? if we are going to start being paid higher proc fees for certain types of business where is that going to leave people who need advice but won’t get it because the broker won’t be paid sufficiently for it. i think this is a dangerous route to go down. i will also be surprised if the FSA did not step in as one thing they have always wanted is uniform proc fees.

  • Les 16th April 2012 at 11:09 am

    In principle, sounds like a good thing, howvere…

    On a practical level, how is one supposed to disclose to the client the procuration fee to be earned?

    Will the lenders advise intermediaries, in advance of an application, just exactly how much they and their club/network will earn for placing the business?

    Or will the lender decide, post-processing, how much to pay for that business?

    Compliance will ne a nightmare!

  • HW 16th April 2012 at 11:05 am

    Quality of business submitted – where will all this hyprocisy end? Surely, this is just a provider’s terms and condition of lending that varies from lender to lender and differs according to the business they want to attract. What is new or revolutionary with that? Is it perhaps the ‘quality’ of the application and follow up documentation leading to lower underwriter re-action and quicker processing to offer that will be rewarded?

  • Bobby 16th April 2012 at 11:02 am

    Call me cyical if you like but this will just be a reason for lenders to not pay proc fees for whatever reason they see fit and without a reason and you can be 100% sure the top proc fee will be the derisory 0.35% we get now and the average considerably lower, 0.1%-0.2%.

    The whole thing is beyond a farce now.

  • Jonathan Burridge 16th April 2012 at 10:32 am

    This is an interesting development, however, it stands a real risk of consolidating an already heavily culled distribution arm, with smaller intermediaries being forced out of the market or into a larger business or network, because, perhaps, part of the criterion will be volume of business submitted as well as quality. The FSA is squeezing the DR side of our industry and I am sure they would like to see far fewer direct reports with more going through Networks or larger business. This could the first signs of lenders supporting that view, after all, the lender that deal with less distribution channels will see a significant saving in their costs, so perhaps this move is more financially driven than quality based. Regardless of all the rhetoric to the contrary that comes from some providers, intermediaries are only as important as the market dictates. With most lenders having to support a branch network and also struggling with funding, intermediaries are, perhaps, an unnecessary expense at this time. I have recently read commentary from industry leaders whose careers were built off of intermediary distribution raising questions about how valid this channel is in the current climate and I have been waiting see how our industry will evolve as a result of the last five years, perhaps we are beginning to see a glimmer of the direction it will be taking. My overall concern is that, unfortunately, we seem to be regressing rather than progressing, with regulator led limitations that are pushing us back to when I started in the industry. Now, perhaps, we are starting to see lender lead moves that will further restrict consumers access to independent advice.

    However, if moves such as the one suggested in the article lead to a raising in standards of both intermediaries AND lenders practices then there are possibilities of significant benefits for providers and consumers. If the quality of the business being submitted truly improves as a result of such moves then that could mean that providers will work more closely and transparently with the intermediary. Who knows, that could lead to the point of mutual respect and partnership that creates true collaboration and therefore innovation. Such steps could even work to the satisfaction of the Regulator, perhaps, allowing a reduction in the cost of supervision and a regime that will allow development and innovation without the current level of encumbrances imposed upon the sector.

    Whatever happens, the seeds of change to appear to finally be being sown.

  • Mark 16th April 2012 at 10:22 am

    I think the lenders need look at themselves first as we do all the running around to only earn a fraction of commission we did before the crash

  • Dazed and Confused 16th April 2012 at 10:19 am

    Weeeeeell…in theory it sounds like it might be a good idea. Just so long as the lender can make its criteria for cases clear, straightforward, easy for all parties to understand, no changing of criteria once case is accepted, then perhaps it might work.
    At least those of us who are left and do know how to package a case correctly should then get paid hopefully an ENHANCED proc fee!! Yeah right!

  • Ben 16th April 2012 at 10:16 am

    only a lender can see the quality of a broker’s introduced cases – not even the network and especially not a club can see how a mortgage has performed – surely this is the measure of quality or do they mean sub-60% 1 x income is better than 85% 4.02 x income?

  • Richard 16th April 2012 at 10:08 am

    My guess is Abbey is the lender, based on rumblings I’ve heard. Does sound like a good idea on the whole.

  • Richard 16th April 2012 at 10:08 am

    My guess is Abbey is the lender, based on rumblings I’ve heard. Does sound like a good idea on the whole.

  • James 16th April 2012 at 9:48 am

    So lets get this right. This company wants us to submit business but before we know if the payment received will match the fee we need to charge our client to survive we have to wait until the business being submitted is vetted for quality by the provider. There will be a point in the future when these providers will start asking themselves why there are so few mortgage brokers left, and those that are, for whatever reason aren’t using them? I look forward to some common sense coming back into this business but I guess I’ll be long gone by then.

  • Mary Lockyer 16th April 2012 at 9:47 am

    provided this is genuinely quality related not quantity driven, but please stop moving the goal posts,I have encountered some incredibly obtuse practices by lenders on top quality clients, ie NHS consultants where not only were the last 3 P60’s, last 4 months payslips and bank statements requested but also the last 3 contracts of employment too, and the case was below 75% LTV and a remortgage to boot with no additional borrowing.

  • Ancient Wisdom...is a mortgage broker in N3 16th April 2012 at 9:36 am

    It seems liek a good idea – I bet its a dual pricing lender thats doing it too!

    Why dont brokers get paid extra for unnecessary delays in processing as well?????

  • Tim Lynch 16th April 2012 at 9:11 am

    Remunerating intermediaries on the quality of the business they produce makes perfect sense to me.

    At last some positive news on a Monday morning!!!