When lenders start using words like ‘maximising internal resources for profit’ then lines start to get blurred
Mark Graves is director of Pink
We enter 2015 off the back of a number of proc fee changes as lenders re-align their approach to the intermediary market. There was much talk in 2014 about lender quality matrices and whether they are designed to benefit the client or the lender.
The question is, where does the customer fit in? If matrices are produced to benchmark quality I am totally supportive, however I am not so sure that is always the objective. When lenders start using words like ‘maximising internal resources for profit’ then lines start to get blurred.
But here is the rub: a broker acting in the best interests of his or her clients is duty bound to place a case with the best lender and best rate for that client. If a proc fee is changed up or down due to the conversion rate between DIP and application, or between offer and completion it is hard to see how that is in the best interests of the client.
Sometimes a case may be slightly challenging but a broker necessarily presents it best they can and aims for the best product for the client. If a lender imposes financial penalties for too many failed DIPs then the broker will eventually act in the best interests of the lender not the client.
Similarly, if a broker is arranging a mortgage for a client buying a house in a chain, there is more chance of someone pulling out and the completion not happening. If the proc fee changes based on conversion rate then by definition the lender is dictating the type of cases it wants you to submit.
Finally we get round to what we should be all focused on which is stamping out fraud, this is what quality business is supposed to be about. Hardly any aspect of a quality matrix helps the broker or the network resolve this. What is worse, if a lender deals with a potential fraud cases secretively the broker is often found guilty until proven innocent.
It is emotional blackmail to put a broker’s livelihood in the balance without them knowing the reason why. For every case that is in fact fraud I can show you a suspected case that has an explanation behind it.
Is it right that a fraudulent broker that has been identified and dealt with should change the proc fee of everyone else within a network? Of course it shouldn’t so why would a lender choose this approach?
A fraud case can happen to any network big or small, brilliant at compliance or otherwise, but any matrix that is percentage based will always hurt smaller networks most, it is simple mathematics - the more advisers in a network the more fraud cases you can have before it shows up on a matrix. Not every lender works this way and the majority are at pains to make it clear that financial penalties do not work and are not in the best interests of the client.
If there is one wish I have for 2015 it is that we unite behind a common goal. This should be that we all work together to eliminate fraud. We need to remove the distrust of using proc fees as a weapon. Lenders need to build a relationship with brokers and acknowledge that they are in the front line regarding stopping fraudulent activity and an open approach will benefit all of us in stamping it out.
