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Jeremy Duncombe: Retention proc fees are essential

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Lenders who pay fees contribute to better service for clients

The introduction of the MMR in 2014 had a significant impact on brokers’ workloads due to the more stringent affordability testing and lengthier advice process it created.

Most lenders have raised their procuration fees to reflect the changes, but retention proc fees have been almost forgotten. It is paramount that more lenders pay proc fees on retention business. Brokers still need to go through the full advice process in these cases, requiring them to dedicate an equal amount of time and effort as they would with new business.

Tasks such as maintaining contact with clients and holding regular reviews, as well as notifying customers during the months before maturity, are a significant part of a broker’s role. Intermediaries should be rewarded for providing the best advice for the customer but equally they must play their part by ensuring they are not just concentrating on new business.

Lenders should invest in their systems to enable the payment of retention proc fees, so brokers can, in turn, invest further in their own systems and provide a better level of service for the customer.

Paying a fee for retention business will also benefit lenders who choose to do so.

Building goodwill with brokers helps with relationships, increases awareness and boosts choice, creating a win for all parties. It is encouraging to see more lenders, such as Cambridge Building Society, beginning to recognise this.

That said, there is still a long way to go. I hope to see more lenders follow in Woolwich, Halifax, BM Solutions, Clydesdale and Metro Bank’s footsteps by making retention proc fees part of their new year’s resolutions.

Jeremy Duncombe is director of Legal & General Mortgage Club

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  • Chris Hulme 14th January 2016 at 3:25 pm

    The early days of MMR roughly trebled the workload of the broker in sourcing, application processes and compliance but these later days of continuing servicing isn’t just an issue fiscally, it is an issue on the transaction where some lenders still don’t have broker product switch options, proc fee or not.
    We should, as Jeremy points out, congratulate the lenders who have taken the step to work with brokers on product switching and payment of the appropriate proc fee for that work but we do also need more pressure on those lenders who simply use the broker to get the client in and cut them out thereafter – the lender that do not have any product switch options that can be arranged by the broker.
    The pressure should persuade lenders that actions in supporting your broker client as well as your borrower client are equally important in the TCF and TBF.

  • Stuart Gregory 14th January 2016 at 11:53 am

    Great that this is being highlighted – perhaps Woolwich can explain why they only however pay around 50% of their normal procuration fee for retention business – AND more importantly – why they only pay a procuration fee on the ‘elements’ of a mortgage switched.

    So, this means if your Woolwich client has three parts to their mortgage, but want to switch only two of them, and you retain the WHOLE mortgage for Woolwich – they only pay you for the two that switch. Which, is unfair.

    Our workload, as Jeremy correctly states, is the same for retaining a client for a lender as it is for a ‘new’ re-mortgage. Our compliance requirements don’t lessen as a result. I questioned Woolwich and was told ‘well, we don’t have to credit check the clients and our workload is less so that’s why you’re paid less’.

    Treating brokers fairly?!