There are many things in life that, while making life easier for the user, always seem to draw criticism. Liposuction is one, if not an extreme, example and outdoor patio heaters can probably be said to match this description too. In the mortgage world, a prominent example of this seems to be the cascade system, for while it offers brokers a time-saving device, there are accusations that it makes them lazy and red compliance flags are often raised about the issue of ‘best advice’.
“People get hung up on the compliance issue of cascading,” says Jeff Knight, director of marketing at GMAC-RFC. “The intermediary is free to recommend which product they think is best and are experienced enough to know if it is a good product or not anyway.”
Mehrdad Yousefi, head of intermediary mortgages at Alliance and Leicester, concurs. “The issue is having the ability as a mortgage lender to say that if you don’t qualify for one product you can have another that does meet your criteria. This is both meeting the customer’s demands and treating them fairly.”
Irresponsible cascading?
However, because of the way cascading works, it will always come in for some criticism depending on your interpretation. Reports of brokers being lazy by using cascading irresponsibly will always carry weight because they mean the broker may be recommending a product when he hasn’t re-checked the rest of the market. With the Financial Services Authority (FSA) placing great emphasis on the broker showing exactly how a decision is made, it is up to intermediaries to make sure they can justify that course of action.
Rob Clifford, managing director at Mortgageforce, explains: “It can be perceived to get in the way of the quality of advice as this may cause the broker and the client to just go with the product on offer. But it doesn’t really impinge directly on ‘Treating Customers Fairly’ (TCF) apart from the fact there can always be confusion over who is responsible for choosing the product. However, if the client gets the solution for their needs and everyone is satisfied then there shouldn’t be a problem.”
If the client is getting the product they want, where is the problem? As the bastions of independent financial advice, however, the intermediary must be seen to be making an independent choice.
Only a tool
Linda Will, managing director at Accord, says: “Using a cascade system doesn’t absolve the broker from the responsibility of the product choice. It is up to them to make the checks into the right deal for the customer.”
However, can cascade systems absolve themselves from this criticism? With the mortgage world becoming more automated and time being of increasing essence, the cascade system is a useful tool in the intermediaries’ armoury. The fact that needs to be remembered though is that cascading is only a tool.
Will continues: “You always have to remember that cascades are just a tool and not the be all and end all. They’re not there to make the broker’s life easier by doing the work for them but to point them in the right direction.”
Direction does seem to be important though and this is one aspect of cascading which has drawn criticism.
Yousefi says: “If someone is unable to get prime lending then cascading means they don’t have to immediate look at the non-conforming sector. Therefore cascading has a role to play in this respect but it must also go up as well as down.”
However, with the majority of cascading systems being operated by lenders whose primary focus is non-conforming, does this mean the customer’s needs are being disregarded?
Knight argues: “Cascading works when you have a ‘whole of market’ approach and range of products as the client may not be fully aware of their circumstances.”
Bob Sturges, director of communications at Money Partners, adds: “Cascading lends itself more to specialist lending as the clients often have more complex profiles which can change very quickly. However, the responsibility is with the broker to make sure their client is getting the best product, even if this means looking past the cascading.”
Set to remain
Ultimately though, cascading systems are popular with lenders and brokers so they are set to remain a useful tool in the mortgage market. Anything which speeds up the process is usually welcomed as it means a better deal for the client.
Michael Brill, director at Baronworth Investment Services, says: “In terms of speed, the quicker you can get the mortgage sorted means that there is less inconvenience to the client. If they have to fill in another form, it takes up their time and you have to go through the process again.”
However, as the prime and non-conforming markets merge ever closer, it seems cascading, both up and down, will become more popular.
Tony Capon, head of intermediary sales at Salt, comments: “You find now with the prime market there is already an element of non-conforming within it, such as lenders allowing some CCJs on prime products. However, the ability to cascade in the non-conforming market is very important and that is where its main thrust is.”
