This year’s Mortgage Business Expo held in Manchester’s Lancashire County Cricket Club yesterday held a lot of the same old, same old but there were a few surprises.
Good omen for brokers
The Financial Services Authority was, as ever, diplomatic in its delivery of a “market overview” but reading between the lines of policy manager Lynda Blackwell’s speech might just bode well for advisers.
She said: “If it walks like a duck, quacks like a duck – why not call it a duck?”
She was referring to advice and the plain fact that consumers think they’ve had it even if they’ve been through a non-advised process.
She went on to point out that pre-MMR paper in December lenders had told the FSA their sales processes for non-advised were pretty similar to their advised processes.
In which case, her logic went, why not just transfer to fully advised?
Now lenders are backtracking and Nationwide for one openly admitted it’s lobbying for “certain parts” of mortgage transfer and contract changes to remain non-advised.
Blackwell made very clear this is still in consultation – but calling a duck a duck may be a hint of things to come.
What a crap idea
Another boon for brokers may also be on the cards.
After months of frantic worry that lenders are planning to shaft their broker partners and slash proc fees – or pay them based on quality – several lenders had rather a refreshing take on the subject.
“An administrative nightmare” said Platform’s Lee Gladwell, who also called the idea “crap”.
“A blunt instrument to control quality” was the view given by Virgin Money’s Richard Tugwell and he went on to make the valid point that if you pay more for good quality you’re still paying for poor quality.
GE Money’s Mark Snape said he felt it was the lender’s responsibility to help brokers deliver quality processing because it was their lack of upfront information on what documentation is required for a case that was causing a lot of poor quality.
It is the moves made by the big bread and butter lenders that will make a difference to how the proc fee debacle turns out but it’s comforting to see a lot of common sense from even these few lenders.
It wasn’t us, guv
The other thing that cropped up a lot over the course of the day was how angry brokers are about the “demise” of interest-only lending.
The FSA essentially held their hands up and said “not us cop, we didn’t do it” when challenged that lenders had pre-empted the Mortgage Market Review rules that are still yet to be confirmed.
Funding was to blame, said Lynda Blackwell of the FSA, and the “flight to quality” was a straightforward and sensible commercial decision on the part of the lender.
She also nodded towards a belief that lenders may have overreacted.
I have to say I agree with her. Lenders have used MMR to hide behind - a tactic Blackwell noted was “convenient” for them.
Brokers in the audience meanwhile were clearly passionate about the need for interest-only.
But there was not only frustration that lenders were running for the hills.
There were also fears that advising a client to take an interest-only deal when they’d had it fully explained to them might land the broker in hot water years down the line when consumers “forgot” they understood at the point of sale, the risk they now face of not being able to repay the loan.
Virgin Money’s Richard Tugwell made perhaps the most important point of all on interest-only.
He said don’t judge lenders yet. The fact the MMR isn’t out yet has caused several lenders to use it to rein in interest-only lending which ties up their capital.
It has consequently forced other lenders who do want to do it to pull back because they’ve been swamped.
Muddled into that is the commercial decision to make margins where they can be made and Platform explained its decision to bail out of new interest-only altogether was actually because it wanted to do 90% of its new lending on buy-to-let.
It may yet move and expand again and - given the fact the FSA graciously did not ban it - there is scope for this in the future.
One other interesting tit bit was touted – price interest-only for risk. Customers want it and often it’s a performing asset for lenders – but it ties up capital and there is the risk the repayment vehicle won’t be there in 25 years.
So make it more expensive than it is – just like near prime comes at a premium, why not interest-only?
Bigger and better and bridger
I’ll give you three guesses. Uhuh. Bridging, bridging, bridging.
If any brokers who attended the show didn’t already know that bridging lenders were fighting tooth and nail to encourage them to refer business to the short-term market instead of turning customers away, they surely will now.
The bridging brigade was out in force, business cards at the ready, “my lender’s bigger than yours,” heard from all corners of the room.
But while it’s understandable bridgers’ presence dwarfed the major lenders exhibiting, because quite frankly they have the cash to splash and boy do they splash it, it is completely at odds with reality.
The bridging market accounts for £1bn of lending a year. And that’s a finger in the air guesstimate of how much business gets written. The mortgage market did £138bn gross last year.
What is all the fuss about?
Mostly it’s about money. These lenders have fat cat margins and there is appetite from funders to finance the sector.
But it also about the sector itself. During the seminars held over the day bridging cropped up a disproportionate amount – in particular the threat for brokers of getting bridging wrong and perpetuating a fraud possibly without even realising it.
John Malone, PMS’s executive chairman and the chap who’s made it his business to be the wider mortgage industry’s voice against fraud, put his finger on it.
He charged that the bridging market was rife with attempted mortgage fraud – note, attempted not necessarily achieved.
He even went as far as to mention the “self-cert and sub-prime” words. He also accused the sector of having some less scrupulous lenders still underwriting to repossession.
Bridgers bluster till they’re blue in the face about how overblown this accusation is.
In fact who’s right or wrong matters less than the indubitable perception that the bridging market is guilty of all this.
Perception is everything – as bridgers advertising their wares yesterday well know – and they would do well to think about how they challenge the negative perception they’re faced with.
Interestingly Malone also commented on the fact that Sesame and PMS had “had the FSA knocking” recently and that part of that conversation was to tighten up processes to help crack down on fraud.
Far be it from me to note that the network has recently appointed just one lender to its short-term panel – and that lender is fully FSA regulated.
Nuff said.
