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Lloyds set to link proc fees to business quality

Lloyds Banking Group will begin linking the procuration fees it pays brokers to the quality of business submitted from the beginning of next year, Mortgage Strategy understands.

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The group will begin telling brokers what metrics it will use to measure quality by the end of the year.

However, the change will only apply to its key accounts and directly authorised firms will not be affected by the move, although it is not known whether the lender will include DAs in the future. The move will only apply to the BM Solutions and Halifax brands.

In September 2012 Mortgage Strategy revealed the lender was considering linking proc fees to quality, although at that point it had not made its decision.

A Lloyds spokeswoman says: “We are always looking at ways to ensure we receive quality business from our intermediary partners, and have been clear over recent months that we are considering linking our proc fee payment structure to the quality of business supplied.

“We will be able to provide more details as and when it’s appropriate.”

Nationwide, Barclays, Royal Bank of Scotland, Coventry Building Society and Yorkshire building Society have all said they have no immediate plans to implement a similar payment structure.

The move follows that of rival Abbey for Intermediaries, now Santander for Intermediaries, which switched to a quality-based payment system in July last year.

Santander measures quality against a number of key metrics, including case packaging and the conversion rate of applications to offer.

If I Were You chief executive Rob Clifford believes more lenders will undoubtedly follow Santander and Lloyds to stem the risk of receiving poor quality business.

He says: “To mitigate the risk of getting a flow of less good quality business then I think it is inevitable more lenders follow suit. We are not talking about a couple of lenders on the periphery of the sector doing something which is out of kilter with the market; we are talking about two of the biggest lenders in the UK. So it will be dangerous for lenders that do not adopt a similar approach.”

Separately, Countrywide financial services director Nigel Stockton, who was previously the sales director of mortgages at Lloyds, has called on lenders to increase the proc fees they pay brokers.

He says: “Given that we brokers are now an inexpensive and variable cost channel for distribution, take full advice risk, are operating in the growing markets with unprecedented volume, I do have to ask why are our procuration fees not increasing?

“Why are we still facing into fee reductions? How long will it be until we actually use the Association of Mortgage Intermediaries and discuss a fair recompense for our increasingly professional advice and services but at increasingly lower costs?”

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  • Aiwahubee 7th September 2013 at 3:35 pm

    Why be annonymous. I agree with the fact that lender underwriters do waste our (brokers times) sometimes and it seems the broker has to assume the position because lenders and the regulator don’t trust us. They bloody need us!!!

  • Grey Haired Underwriter 6th September 2013 at 9:18 am

    It is unfair to say that all experienced underwriters have been pensioned off – I still have my 30 years plus experience to work from but I do accept the point that far too much technology has got in the way of a sensible decision.

    The issue is how we get back to rational lending and how we manage MMR’s requirements for human intervention in the lending decision. Having spent some time working through the ways of dealing with MMR rules I am bound to say that many of them are almost designed for contentious issues between lender and broker. Affordability is one of the main issues and lenders will either use ONS data for the income and expenditure or we will plough through some home made formula and argue about how much someone spends on food and fags each week. If we use ONS data I foresee a situation where a large group of the population will never be able to get a mortgage but if we use ‘home made’ data there will be perpetual arguements about costings. Which is preferable? This then brings me to the crux of the article inasmuch as the quality of submission has to be subjective unless the lender is dealing with a wholly ‘vanilla’ case. For other cases will the perpetual too-ing and fro-ing between lender and broker be considered as bad packaging?

    It’s a lovely idea to pay for perfect packaging but once again a large lender has put on the rose coloured spectacles and I would bet that the person responsible for the idea has never lent a bean in his life.

  • Richard 5th September 2013 at 2:58 pm

    Peter Jones 4th Sept @ 4:48pm says “Poorly trained staff and useless IT systems which have cost thousands of pounds simply do not work. Human interaction is the only way.”

    Surely human interaction = poorly trained staff so where is the benefit of just ditching the IT platforms ? Properly trained staff will never materialise.

  • Peter Jones 4th September 2013 at 4:48 pm

    The issues are occurring with poor service before it even gets to an underwriter that’s the point. There is no standardised procedure or common sense employed before the legendary pre pre underwriting sign off. Therefore interpretation of how pay slips, earnings can be broken with each lender varies dramatically. Poorly trained staff and useless IT systems which have cost thousands of pounds simply do not work. Human interaction is the only way.

  • Aidan Cox 4th September 2013 at 3:34 pm

    KC – I am wondering if you are being deliberately obtuse? The underwriter is a representative of the lender. I do not send my mortgage applications to an underwriter I send them to a lender. Therefore if a broker receives a reduced proc fee – he is paying for his mistake, I originally was intimating it would be nice if lenders were financially accountable for their mistakes – I cannot see why you would take offence to that stance. There are cetain lenders whose staff give woefully inconsistent information.

    Anyway lighten up it’s just an opinion

  • James Lindon-Travers 4th September 2013 at 2:36 pm

    The quality debate will rumble on well into MMR next year and the usual anonymous contributors will be spitting their dummies,yet both lenders and brokers need to embrace the issue together.

    Lloyds idea to link proc fees to quality makes sense as in theory those who introduce better quality may receive higher proc fees. It is down to any lender adopting this approach that they have sufficient MI to reward each individual firm with better fees in return for quality. It should not be one uniform fee per Network because we well know it only takes a few ‘bad apples’ in a network to lower quality standard overall. Furthermore brokers who do introduce excellent quality business should be reward with experienced contact staff who can handle cases efficiently. As I have said before in Strategy post Financial Crisis underwriters are still learning, as many are still new to the role. Sadly all the experienced underwriters got pensioned off in the boom when most cases went through on an electronic nod.
    Networks also need to play their part to ensure their sales processes are robust enough to meet the post MMR world.

  • KC 4th September 2013 at 2:20 pm

    Anonymous | 4 Sep 2013 1:36 pm

    It appears a few feathers have been ruffled and you are flustered/hot under the collar. Sorry I just don’t understand the below statement

    WE WILL BE PAYING THE UNDERWRITERS FOR WASTING THEIR TIME BY BEING PAID A LESSER PROC FEE!!

    You wont be paying the underwriters anything.

    I suppose the comment ‘time for me to bend over and assume the usual position!’ isn’t offensive in anyway??

  • john 4th September 2013 at 2:00 pm

    think the point he is making is that he has spent time on the phone to the lender, clarifying a point that seems to have already been made to them, on numerous occassions, thereby stopping him from doing somethign more productive than holding on the phone. the point is we waste time daily explaining to lenders how their systems work, how it fits criteria, but they employ staff who dont know what comes after B, so wjhy should we be recompensed when we are wasting out time on non billable work. you must live in an ideal world KC.

  • Aidan Cox 4th September 2013 at 1:36 pm

    KC – your tone is quite offensive and your logic is shot.

    To quote: “if we use the same logic then Brokers should pay underwriters for wasting their time….”

    Thank you for so eloquently making my point:

    WE WILL BE PAYING THE UNDERWRITERS FOR WASTING THEIR TIME BY BEING PAID A LESSER PROC FEE!!

    So to make things simple for you:

    a) Well packaged case dealt with efficiently by the lender – everyone happy

    b) Poorly packaged case – Broker penalised for Lenders time/ hassle

    c) Case managed poorly by lender – Broker not recompensed for his time/ hassle

    Happy now? – so glad we could clear this up

  • KC 4th September 2013 at 12:54 pm

    Anonymous | 4 Sep 2013 12:30 pm

    I didn’t even bother to finish reading your drivel after the point of ‘recompensed about 4 hours of time! Isn’t that your job? Why would it ever be the lenders job to pay you for that. If we use the same logic brokers should pay underwriters for wasting their time sending in irrelavant/ incorrect documents, missed items on applications etc etc etc

  • Aidan Cox 4th September 2013 at 12:30 pm

    BM Solutions just delayed a case by a month which could have been resolved had they “listened” at the start. I have had to call them on countless times and the average hold time of 20 mins. So to be fair I would like to be recompensed about 4 hours of time – just tack £200 on to my proc fee and we will call it quits. Sounds fair to me – quid pro quo and all that. I would quite happily take the pepsi challenge against the lenders to see who is most efficient/ screws up most as long as they pay me when they screw up. That does sound fair doesnt it? – oh sorry I forgot this is financial services – time for me to bend over and assume the usual position!