The Mortgage Introducer Sub-Prime & Technology Forums, in association with the Mortgage Times Group, were held at the Millennium Stadium in Cardiff on 4 September, Bridgewater Hall in Manchester on 2 October, and the Royal College of Physicians in London on 17 October. These events gave over 200 visiting intermediaries the chance to have frank and honest discussions about the state of the market after the impact of the credit crisis.
The implications of the credit crunch have affected all sectors of the market, but in the non-conforming sector we’ve seen lenders repricing seemingly at will; rates have risen from 0.7 per cent to 1 per cent by some lenders, and lender criteria has shifted with a reduction in loan-to-values, removal of heavy adverse schemes and the tightening of affordability models.
In terms of securitisation, more and more lenders have found it difficult to secure funds as prospective buyers are nervous about performance of loans, and a reduction in the purchase of loan book portfolios has also taken place. Many of the UK-based lenders were selling portfolios to other lending institutions, such as building societies, and they are either originating their own mortgages now or are reluctant purchasers.
Knowledge equals power
Knowledge has always been power in the non-conforming market. The Financial Services Authority (FSA) is always closely monitoring the adverse sector; as far back as November 2005, the suitability rule was identified by the FSA as an area in which firms could improve. It revealed that 80 per cent of intermediaries were unable to justify how the non-conforming mortgage product they had supplied to their customers was applicable to their needs. What is clear, even within the current climate, is that staying ahead and knowing as much as you can about selling non-conforming products is vital to success.
Addressing the situation
The forums aimed to address the current market situation, and with many industry professionals present, these were discussed honestly and openly to visiting intermediaries, covering everything from the legal implications involved to the important technological enhancements that are taking place in the marketplace.
Simon Axford, a visiting broker from Cedar Mortgages Ltd, commented at the Bridgewater Hall event: “It was quite obvious that everyone was worried about the current climate, but the forum sought to allay fears, and in a fantastic venue the open discussions were invaluable to getting back to business. Eddie Goldsmith, senior partner at Goldsmith Williams spoke very well and made a lot of sense.”
Visiting intermediaries also got the chance to see the Mortgage Times Group’s Vision Mortgage Software, the new operational system for the group, offering a market-leading front and back office mortgage system. The system includes an online case-tracking facility, enabling brokers to track the progress of a case at every stage, with online dialogue with your processing team also occuring throughout the case. The system also enables cascading and integration between the Mortgage Times Group’s 25 packaged lenders, ensuring that case details can be transferred between our packaged panel if lenders are altered, and full integration with xit2’s valuation exchange. The system also includes an online sourcing system with the ability to source non-conforming products, and will enable the broker to instruct their own valuations online via an automated valuation, as well as instructing a solicitor through the online facility.
Room for optimism
Looking ahead at the non-conforming arena, there’s room for optimism in the future. Lenders now have a greater understanding of the market and the associated risks, whereas previously they did not have the experience of knowing how the loans would perform. There has been a knee-jerk reaction to the credit crunch and when things settle back down, lenders will be armed with the performance data to re-emerge strategically in criteria areas as and when they see fit.
We also see the light adverse market coming to fore in the middle of 2008 as prime and near-prime customers come to the end of their product benefit periods and encounter much higher monthly mortgage payments due to the rate rises. At the darker end of the market, repossessions are reported to be a third higher than this time last year, which inevitably leads to greater opportunities in the non-conforming mortgage sector.
