In days gone by it was trendy to be a member of a golf club, squash club, or even a bridge club. However these days, there is a lot less time to think about social clubs, because it really is a competitive world out there. You can now be socially acceptable without being a member of any type of club, unless your involved in writing mortgage business, of course.
In this day and age, with regulation around the corner, CeMAP exams a pre-requisite, paperwork suffocating your workspace, a knowledgeable client base, it really is a scrap for every penny you earn. The only way to survive is to take advantage, play the field, do a deal, or better still, know your market.
Keeping control
The majority of mortgage intermediaries want a quick, efficient, hassle-free service, which they can provide to their clients, while still earning the best procuration fee available. Rightly or wrongly they assume they can achieve this by keeping control.
So where do you go to be rewarded? One clue is, not direct to the lender. There are a number of organisations in the marketplace with immense buying power and as a result can offer higher procuration fees for writing the same mortgage deal you were going to write anyway. Your client is unaffected, receiving the same product on the same terms already recommended. The only difference is you earn more money. On average you will probably earn at least £25 more per case. Sound simple? Make sense? Then why is such a large proportion of intermediary mortgage business written direct with the lender on lesser terms?
Successful clubs
It doesn’t matter what your status or inclination may be, there is at least one organisation in the marketplace who can reward you with a higher procuration fee than you can obtain on a direct basis. Almost every major lender is on the panel of at least one mortgage club. So why not use them? Your case goes directly to the lender, you deal with it in the normal way, keeping control. There is a little extra work - you might have to fill in a submission form with your details, or put a sticker on the application form, but is that really too much to ask? Just take a look at some of the routes you can use to be better rewarded. AXA, Friends Provident, Legal & General, Mortgage 2000, Mortgage Intelligence, Mortgage Next, Norwich Union, Pink Home Loans, Prudential Premier Mortgage Service, Scottish Provident, TMO, Zifa, to name but a few.
Are they successful? Well, Premier Mortgage Services completed £11 billion worth of mortgage business in 2001, Legal & General £9.5 billion, Zifa £1.5 billion. These are pretty significant statistics. Life companies like these have targeted IFAs in order to obtain additional life business, which is more important to them than the mortgage. There is plenty of evidence to suggest that it hasn’t always worked, however it has resulted in these companies taking a reasonable slice of the mortgage market. Non-life company clubs have also been extremely successful. One reason for this might be that anyone can use them. It doesn’t matter whether you’re an IFA, tied agent, or a mortgage broker, there is no restriction. Although it goes occur, a tied agent of one life company is not supposed to use the mortgage club of another. This is where the likes of Mortgage 2000, Mortgage Intelligence, and Mortage Next, can score.
Background
Mortgage clubs haven’t been around that long. Legal & General started theirs in 1995, Zifa in 1998, and Scottish Amicable (now Prudential) in 1996. The latter started with a panel of 10 lenders and achieved over £1 billion completions in 1997, and has since grown to include 34 lenders and completions in excess of £10 billion per annum. A similar story exists with the non-life company mortgage clubs. Mortgage Intelligence launched in 1996 as did Mortgage 2000, both are now introducing in excess of £1 billion in mortgages per annum.
So how have they come so far? Today, lenders need guaranteed results, they want to know that they will achieve a certain level of lending. Failure means cost cutting exercises reaching as far as middle managment. Can mortgage clubs prevent this? Unfortunately not, however by striving to deliver volume business they can have a significant impact on a lender’s target. In the past the key to success was to offer all intermediaries a route to acquiring higher rewards. John Malone of Premier Mortgage Services, explains: "PMS has enjoyed significant growth over the last 5 years, as we recognised that with our collective bargaining position we could provide significant benefits to those operating in the mortgage market regardless of their size."
Benefits
Of course, it wasn’t just about attracting intermediaries, the concept had to be sold to lenders. Sally Laker of Mortgage Intelligence says: "Mortgage clubs enable the lender to access large distribution channels at minimum cost. There is a definite added value for lenders."
Most of the mortgage clubs in existence offer some additional benefit to intermediaries. Zifa have a generic application form, as do Mortgage 2000. Legal & General have a tiered fee system, Bronze, Silver, Gold, Platinum, and Platinum Plus with the level of procuration fee based on the amount of applications submitted.
Mortgage Intelligence offer free sourcing software and leads, although their setup is fairly unique as an intermediary needs to be an associate or full member for which there is a charge and Mortgage 2000 offer an electronic trading facility through the Mortgage 2000 platform.
Top clubs
You may ask which is the best, well I would suggest that none rule the roost. Yeh sure, Premier Mortgage Services, and Legal and General, do the most business, but do Ford make the best cars? Malone says: "Our facility was designed to assist all mortgage intermediaries, in that we made the system very simplistic and, by doing so, have assisted our panel lenders in knowing who they are dealing with. This has created strong relationships between the lender, intermediary, and ourselves."
Laker adds: "Not only do we provide ‘muscle’ for the smaller broker, but we act as a wholesaler for both products and procuration fees. This gives the broker a fair deal and an edge in a competitive market."
All clubs have their own merits and it’s a case of finding the right one, or maybe the highest procuration fee for each individual case? All I know for sure is that if you don’t use a mortgage club your turning away easy money. Steve Butler, key account managera at Mortgage 2000, agrees: "Every mortgage application is a source of income. You look for the best deal, fill in a submission form or put on a sticker, it doesn’t matter, as long as your bank balance is better for it. The beauty is you don’t need to be tied to one source, you can access whoever offers the best fee at any given time."
In general terms mortgage clubs are a growth area. Pink Home Loans and more recently TMO have joined the fray. A mortgage club relies on its own distribution and the companies mentioned here are all major players. Lenders know that they can reap the rewards by partnering with major distribution channels. Recently almost everything has been geared to making life more difficult for intermediaries, for once this is not the case. The intermediary is the winner here, those who know, already subscribe. Those who don’t, well hopefully you will have learnt what you’re missing out on.
Sean Hornsby is sales and marketing director at Mortgage 2000
