The role of the broker is a busy one, with constant movement in the mortgage market, new deals launched on a daily basis and new lenders entering the market – not to mention the regulatory needs that have to be met. The fact that modern brokers have much to keep them busy was highlighted last week by the Financial Services Practitioner Panel.
With this kind of workload, not to mention the day-to-day business of dealing with customers old and new and ensuring that applications are put through, the business of the mortgage broker is a busy one.
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Mark Charlesworth, head of Future Mortgages, has talked about the need for brokers to add second charge business to their portfolio with an estimated £30 billion industry waiting to be unlocked. Deemed as a subsequent charge to the first charge, the holder of the second charge has a legal call on the property in the event of the borrower defaulting on repayments, but only after all liabilities to the holder of the first charge have been settled, for example, a secured loan plus a mortgage. First charge is a legal right under which the holder, who is also known as the first charge, has the first call on the property in the event of the owner defaulting on repayments.
So is this a viable option for brokers to move into? Surely if the finance is there, it is a no-brainer, but if you are unable to give the work your full attention, then is there any point in starting a second change proposition?
No reason
To give a better understanding of his desire for brokers to move into this area, Charlesworth explained that he saw no reason for brokers not to be able to offer a combination of first and second charge business as well as move into personal loans. Charlesworth said: “The traditional solution has been to remortgage borrowers, but with the use of factfinds and the requirement to provide ‘suitable advice’ many advisers are now promoting secured loans as a way of repaying unsecured debt and re-budgeting finances. This solution can also save borrowers significant amounts of money, as early repayment charges, legal costs and valuation fees are avoided.
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“Not only is the secured loan option considered in many instances ‘suitable advice’, it also allows the intermediary to earn a healthy commission paid on completion of the loan.”
Causing friction?
While loans may cause some friction within the industry, especially with brokers dealing with applications for unsecured loans, the secured variety received a boost recently with the introduction of the Secured Sourcing module by Trigold. Using the system, brokers are able to source secured loans by selecting the compliance link on Trigold. This has recommendations and questions to ask the client, a quick quote and sourcing link follows for rates and repayment charges with the final option to refer the deal to a master broker.
The module gives brokers the opportunity to create a solution for an area that it is deemed to be very difficult to sell and advise on, which brokers normally deem as ‘something that somebody else does.’
Bill Safran, CEO of Trigold, said: “It has been suggested by a number of commentators that in order to provide best advice and treat customers fairly brokers must consider secured loans as a financing option. Our job is to provide the tools that advisers need to do their job effectively and so we’re delighted to launch this new facility. Secured Sourcing provides an instant new product opportunity for Trigold subscribers and also fits within a process and program that they use every day.”
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Loanmakers managing director, Tim Wheeldon, who originally created the bespoke sourcing engine into the Prospector AAA platform to create the Secured Sourcing tool, was positive about the effect of the Trigold project. He claimed that it would provide users with access to other options and second charge mortgage lenders.
Wheeldon said: “The aim of this project was to ensure that brokers were not only able to source a secured loan product themselves, but also able to document the reasons why the product was being chosen giving them the ability to compare a wider range of financial products. This ensures the broker can offer best advice to their clients while crucially allowing them to retain control in the initial stages. This represents a major leap forward for the industry.”
Following these opinions, it was important to understand the viewpoint of the broker, who will be most affected by this advice.
Nick Gardner, communications manager at Chase De Vere Mortgage Management, said: “I don’t know much about personal loans but there is a demand for second charge and I believe that there is a market for it. I wouldn’t be surprised to see more brokers go into it as people do need help there.
“Second charge is a big market and quite complicated but if brokers want to expand it is a much more feasible option. Personal loans applications are quite different as it is not very straightforward yet not particularly difficult to work out as applications can be done online. Unsecured loans are not a very risky business as, unlike mortgages, there is not the variable to deal with.”
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