Each time a non-conforming lender launches a new online service, speculation grows that it’s another nail in the packagers’ coffin. The argument behind this speculation is that if mortgage advisers are able to deal with their niche and sub-prime business online, then they won’t need to use packagers.
The Finance Centre say that this argument ignores a fundamental truth about the role that packagers play in the mortgage intermediary market. With up to 40% of sub-prime business written outside lending criteria, it claims it is the human element of product sourcing that is critical to sub-prime mortgages, giving a substantial benefit to the adviser/client relationship. Onsite underwriters within packagers’ offices, especially those supporting branded lending operations, can make on-the-spot decisions based on their knowledge, skills and experience that it believes are not possible with an online system that works in black and white.
A lender may argue that borderline decisions will be referred to an underwriter but The Finance Centre say that if they have too many cases falling into this grey area then they don’t get the cost economies that the development of their online system will have been based on. It is to this area of business that packagers’ onsite underwriters can add real value, in turn adding value to mortgage advisers and their relationships with their clients.
The Finance Statement goes on tosay: "In addition, sub-prime cases have an all-too-common habit of changing as the application progresses, as one CCJ turns out to be two, or 3 months’ arrears are discovered to be 6 months’. If the case has been submitted directly to a lender, it will cascade through the lender’s product portfolio as additional adverse history becomes apparent. The adviser has no opportunity to move it to another lender for a better product without incurring further costs and having to start again. With a packager, it’s simple to transfer it to a more competitive lender and, in so doing, the packager adds value to the adviser/client relationship.
"Where a packager is using a generic application form it has always been easy to transfer cases between lenders. It will become even easier as more packagers focus on advisers as customers in their own right and embrace online technology for their distribution and processing operations, enabling faster data flows and better customer support through generic electronic forms, online case tracking and up-to-the-minute management information."
Wayne Smethurst, senior partner of The Finance Centre, explains: “Those packagers that do not have the resources to develop suitable systems will miss out and it is those packagers that I expect to be most affected by lenders’ online services. But there are too many packagers anyway and certainly lenders want to reduce the number they deal with. As lenders reduce their management costs through dealing with fewer but bigger distribution routes, and reduce their transaction costs through electronic connectivity, I would hope that advisers and their clients would benefit through keener product pricing. That remains to be seen but, in the meantime, packagers like The Finance Centre will continue to add value to the adviser/client relationship through smart online services and onsite underwriting.”
