At last week’s PMPA members meeting, concerns were raised about new indemnity clauses in many of the lenders’ pre-‘Mortgage Day’ revised contracts. These were considered unworkable and unreasonable, placing disproportionate business risk and potential financial burden on packagers where introducers fall outside of their scope of responsibility for the sales process.
The PMPA said that in many cases the indemnity seeks to extend cover for all packaged business, in favour of the lender. It argued that packagers cannot reasonably be expected to accept this imposition where many of their introducers are already covered under their own regulatory mandate, for example, a directly authorised broker or an AR member of a network.
Vic Jannels, managing director of All Types of Mortgages (ATOM), said: “As a result PMPA members are signing and returning the contracts with notification that the specific clauses are unacceptable in their current format. The PMPA is also seeking clarification of these contracts reasonableness from legal advisors before responding further to lenders.”
Jannels added that this action is also being taken due to lenders hurrying packagers to sign the contracts. He said: “Many lenders have only recently submitted their contracts with request for urgent responses and there was general concern expressed that this may have caused respondents to return the completed agreement without recognising the potential implications.”
An informed source told Mortgage Introducer: “I agree wholeheartedly with the PMPA’s stance. Some lender contracts are so onerous and place impossible requirements on the packager. It seems lenders have taken accurate legal advice but have not taken into account the commercial implications.”
But Guy Batchelor, sales and marketing director at Platform Home Loans, said: “If introducers have to have professional indemnity cover I don’t think its wrong for lenders to ask packagers to carry this cover as well.”
