The traditional image of the paper-pushing packager is one many in the industry argue is obsolete. Times have changed and the latest tag to surface is ‘mortgage distributor’, which is seen to reflect far more closely what these businesses are now doing. With KGB Packaging and All Types of Mortgages (AToM) rebranding themselves as such, it appears that the packaging industry is shifting its place in the market.
The term ‘packager’ is deemed to be outdated. Rachel Bancroft, managing director of KGB Packaging, says ‘mortgage distributor’ is a more accurate description of the service larger firms provide for intermediary lenders. “The packaging model was all about facilitating the inward flow of cases from brokers into lenders and it involved gathering lots of paperwork for lenders to process on their own premises.
“The distributor role is about providing an outbound channel for lenders by which their products can reach customers via brokers. It involves strategic partnerships with lenders, where they provide attractive products and on-site underwriters to give their partners a service edge.
“As technology solutions continue to make the old function of putting together paper-based cases obsolete, the new distribution model of lender-distributor partnerships is fast moving in to cover that link in the distribution chain.”
Technology is key
However, Paul Brett, director of Freehold, believes the situation is two-tiered. “Large lenders see packagers as distribution houses, as they have enough money to package themselves these days. Smaller, newer lenders look to packagers for administration as well as distribution. New lenders are keen to link up with packagers, but what drives larger lenders to use packagers is distribution, as there are a lot of brokers that don’t want to use lenders directly.”
Yet, whatever the relationship between packager and lender, one factor is seen as essential to a thriving packager business – technology. Eddie Smith, director of operations for the Alliance of Mortgage Packagers & Distributors (AMPD), comments: “Technology is key and whether packagers are prepared to invest in it will determine their survival. Technology is cutting the time of completions on applications and packagers must work smarter. Lenders are keen to help key distributors to develop their e-commerce connections, but they’re only going to offer that to packagers they feel comfortable with. It is the distributors that match the aspirations of the lenders that are the ones lenders’ will then embrace.”
Jon O’Brien, operations director for the Professional Mortgage Packagers Alliance (PMPA), agreed: “A packager worth his salt should be offering online decision-in-principles, generic applications both on and offline, Key Facts Illustrations and product selection online, case-tracking and production.”
But he feels it is not just a technological aspect that is required for a packager to be successful. “Packagers should have a good distribution strategy with a mix of introducers from directly authorised (DA), their own appointed representatives (ARs) if they have any, to being appointed to networks. Packagers that only concentrate on one area are watering down their opportunities for business. Packagers should focus on technology, straight-through contracting and proper service.”
Yet, Brett feels there is a more fundamental problem hampering the industry. “We need a lot more creativity. The packaging industry linked with the lending industry is stale and it needs to be refreshed. To do that, packagers need to discuss with lenders completely innovative products. The quality of packaging is not great. To survive, packagers need to buck up their ideas and service standards need to come up.”
The innovative products that Brett feels are needed within the industry could be created for niches yet to be explored. O’Brien likewise feels packagers should always be looking to new markets for business. “Packagers have to get their act together,” he said. “Needing to specialise and looking for new avenues is an increasing issue for a lot of the mortgage business.”
Desire for specialisation
But while the desire to specialise further is there among packagers, Brett feels lenders need to do more to support them. “Packagers can’t specialise unless lenders have the specialist products to offer. Lenders need to design products high-street brokers don’t want to get involved with and let the packagers have control. Yet, you can only have that in partnership with the lender. But do they desire that to happen? My gut feeling is that mortgage lenders feel packagers are a necessary evil, which is a shame because lenders could create a lot more business if they were more creative and innovative.”
He added: “I can see it happening in the long run that packaging organisations will have their own lenders, which they might share, and then the lenders can be extremely specialist. The industry is becoming so competitive and unless lenders look at being more specialist, their share of the market will dwindle.”
The world of packaging and mortgage distribution has evolved significantly, with the concept of distribution shifting the packager’s place in the market. Yet, if packagers and lenders do lack the drive and creativity to exploit potential new markets, the industry as a whole could be missing out on crucial business. It is those that can innovate on both sides who will lead the way, as technology can only go so far in taking this business forward.
