The role of the mortgage intermediary is ever evolving. Once regarded as a person who simply arranged a mortgage, in today’s market the broker’s services can include arranging life cover, helping clients find and appoint a conveyancer, organising will writing , dealing with commercial finance opportunities; the list goes on.
In fact, this list will get longer as more brokers focus on breaking into new markets as a means of increasing their income stream. In addition, by offering a more comprehensive range of services, an adviser can add value for the customer and increase the potential for repeat business and future business opportunities through referals.
Although post-regulatory advice can be more time-consuming, with the process of taking clients through their options being slower than before ‘Mortgage Day’, advances in technology have countered this and allowed many brokers to free up their time – enabling them to complete more business, or focus on other aspects of their organisation.
Jeff Knight, director of marketing at GMAC-RFC, says: “As technology becomes more streamlined, the time taken over a mortgage has been sped up and has given brokers more free time. Brokers may choose to spend this additional time developing new relationships with clients, enhancing existing relationships, exploring new ways of adding value or to investigate new revenue sources.”
Expanding your business
In an increasingly competitive market, the latter of these two options are most popular with many intermediaries, looking to become either more specialised or more comprehensive in their business outlook.
Jonathan Burridge, managing director at Quantum Mortgage Brokers, suggests that a logical way of expanding on existing business done with clients would be to look into how the mortgage is managed once it is sold.
Burridge says: “Lenders maintain huge customer services departments to deal with these enquiries. However, as lenders increasingly use automated decision systems and automated valuation models become more accepted, the maintenance of these departments becomes questionable when you can pay a broker per transaction.”
With lenders increasingly willing to allow brokers to get involved in general administration issues such as rate reviews and further advances, driven by a greater awareness of the need for customer retention, there does seem to be greater scope for intermediaries to be more involved in looking after post-completion services.
Paul Hunt, head of marketing at Platform, comments: “If a mortgage intermediary got involved with that side of the business, it may well be that they would aid the lender with the retention of that customer, which may well lead to extra remuneration for the broker.”
Conceiving the inconceivable
Historically, when a client needed to change their mortgage it took manual effort, underwriting decisions, making valuations or using finance and legal departments. Nowadays we are approaching an age where a vast amount of decisions can be made electronically and there are standard legal documents and indemnity insurance to cover most of the transactions associated with post-completion mortgage administration.
As a result, Burridge’s idea to develop broker transactions on behalf of the lender is technically viable. Not only are intermediaries qualified to carry out such arrangements with their consumer licenses, they also have a personal interest in ensuring any work carried out satisfies them, the lender and the client.
Presumably, if only for the self-preservation of their business, it is more likely that intermediaries would complete a client’s case more efficiently and to the greater satisfaction of all parties than someone working in a call centre.
Due to the nature of the UK mortgage market, many borrowers will complete on their mortgage, and, apart from receiving their montly and annual statements, have little or no contact with the lender again. As a result lenders maintain huge customer services departments to deal only with enquiries from the small number of borrowers who need these post-completion services.
Burridge believes this is a waste of man power. One of the largest costs to mortgage companies is maintaining vast numbers of call centre and admin staff. With the application of technology, lenders could reduce their reliance on such a large resource and even outsource single transaction administration to brokers.
Burridge adds: “The relationship between mortgage lender and intermediary could go further and even involve collections activities. With Financial Services Authority (FSA) guidelines in place, and many brokers holding consumer credit licenses that include debt management activities, this could aid both client and lender, as a client may feel less inhibited in talking to their broker.”
Resisting change
With customer retention and client ownership major issues within the industry, the majority of intermediaries have strategies in place to contact their clients before their mortgage deal needs reviewing. Most brokers would agree that it is a lot easier to maintain business than to get new business.
With this in mind, many feel that the lender attitude towards intermediary access to customer details once a mortgage deal is in place is somewhat unfair, considering that it was through the broker’s advice and trust in the first place that the customer choose to do business with them.
Martin Wade, director at Mortgage Options, says: “There has been a lot of demand from brokers to have access to clients’ records. From a client perspective, it would be better for them to deal with a broker with whom they have an ongoing relationship rather than phone a call centre. While new clients are the new blood of a company, the foundations and the longevity of a firm is built on existing clients.”
On the other hand, Adrian Lewis, head of marketing at Burns-Anderson plc, does not think brokers should take over post-completion services provided by lender customer service departments. However, he admits: “Lenders should inform the broker if a customer has any problems with their mortgage so they can contact the client and help them reassess their personal financial circumstances.”
Lewis suggests that although it is probably true that many companies, including mortgage firms, are scaling back their customer services department, it ultimately means only clients that require an additional service or have arrears speak to that lender.
He says: “I don’t think the mortgage lender should contact the borrower, except to tell them about their account, and definitely not to cross-sell. However, I would caution any broker thinking of taking on the role of offering post-completion services. It would involve a lot of additional work for very little return.”
Darren Pescod, managing director, The Mortgage Broker Ltd, agrees and says he could not imagine why any business or business owner would want, even for a fee, to deal with post-completion customer service issues, especially those involving further advances and transfer of equity.
He comments: “In my opinion this would be a waste of time and manpower. I would quite happily waive any fee they agree to pay me to free up my time for my core business of advising on mortgages. If lenders feel that post-completion services are a drain on their profits then I wouldn’t want to take their problem on and let it drain my company’s profits.”
Doing the dirty work?
Clearly not all brokers would welcome taking on additional administrational duties that may not offer much profit, although these services would certainly enhance the broker’s relationship with the customer. Unless remortgaging with another lender is a viable financial alternative for a borrower who cannot meet their current repayments, a broker could essentially end up doing the lender’s dirty work and this time the personal touch may make it all the more hard.
The case of mortgage arrears is clearly a contentious issue, although the administration of other post-completion services could be added to intermediaries propositions in the future. Pescod says: “A lender would not allow a broker, no matter how qualified they are, to make amendments in the customer’s payment profile to alleviate an arrear situation – and then pay him for the privilege. However, notification from the lender to the intermediary when a client falls into mortgage arrears would be a step in the right direction, as this would allow the broker to consult with the client and offer advice where appropriate.”
Knocking opportunities
Despite obvious retention benefits and cost savings it seems that the lending market is not ready for letting go of their customer service departments just yet.
Hunt explains that for intermediaries carrying out these transactions, certain issues of impartiality would have to be overcome, although he believes such a proposition would have interesting possibilities from a retention perspective.
Furthermore, Hunt adds that the complexity of certain cases may be too much for brokers who would be better off concentrating on obtaining new business.
He comments: “The individual circumstances of each mortgage, especially non-conforming products, are so complicated it would take a lot of experience and expertise to manage these accounts properly. If a customer on this type of mortgage misses a payment, you have to be very quick in contacting that person. As a lender, I would not be comfortable outsourcing services if a broker had no expertise in this area.
There may be a future for outsourcing post-completion services to brokers among mainstream commercial lending, but I can’t see it on the horizon.”
Knight adds: “The idea of brokers carrying out customer service roles on behalf of lenders is an interesting one. However I imagine most lenders will want to keep hold of these services for their clients. If a borrower is in arrears, lenders will have specific debt counselling services that deal with these problems.”
Imagining that mortgage lenders and intermediaries will move forward in this direction may seem impossible, but the mortgage industry is constantly surprising itself. It is not unusual for long held beliefs to be contradicted within the space of six months. After all, it only takes one lender to set a trend.
Burridge points out: “If you had suggested mortgage offers without physical valuations 10 years ago, or buy-to-let lending at 90 per cent, you would probably have made the credit and risk departments fall off their chairs. It is innovation and forward thinking that maintains our market and I believe mortgage intermediaries conducting post-completion services is a real possibility in the future.”
In addition, Wade points out that such a move would help brokers address the FSA requirement to maintain regular contact with a client. He comments: “This would be a positive step and would allow brokers to continue to add value post-completion, while reinforcing the relationship between the broker and client.”
This relationship is invariably built on trust and this good will is lost if the mortgage intermediary is unable to represent his client to the lender post-completion. If lenders and providers can be convinced they will retain more customers and save money, one day we may see intermediaries and lenders sharing the responsibility of post-completion services. That way, everyone could benefit.
