Dear Sir,
I feel that last week’s letters page (MI, 7 October, page 28) has two entries that perfectly illustrate the place of the packager debate.
Although I agreed largely with his sentiments, I found myself feeling more and more patronised when reading Rob Jupp’s ‘letter of the week’. As a broker with a decent amount of experience placing adverse cases, I found his implication that single lender cascading could be the next mis-selling scandal to be stretching the boundaries of plausibility just a little (is that after or before, interest only, self-cert, equity release, 100 per cent plus, buy-to-let, etc?).
All my sourcing, adverse or prime, is done on a ‘total cost over deal period’ basis and I always start with a list of deals sorted from cheapest to most expensive. As we all know, this does not come down to headline rate and takes into account fees, early repayment charges, method of calculating interest, etc. After determining which lenders would not be suitable due to criteria, features, the customer’s agreement-in-principle (AIP)/application will then go to the most appropriate, lowest cost lender either direct or through a packager/distributor.
If that lender then declines the AIP and cascades it to another scheme, my first stop is not that scheme, but back to the list to see where the offered scheme compares to others that may be available – the next one down the list. At least we know the ‘worst case scenario’ for the customer if a better deal is not available elsewhere. If lenders who offered a number of schemes did not cascade, we would all be complaining that we were receiving no assistance from them in ‘Treating Customers Fairly’ (TCF). After all, we have to be very careful about how many recorded credit searches are done, and this is where a packager can be invaluable (as can the Equifax search through Trigold).
I have always found it useful to ask the customer to get a copy of their file, again so I have evidence on file as to why they fitted a particular lender’s criteria, or didn’t as may be the case. This can be done instantly with Equifax through Trigold, and it need not cost the customer anything if they take advantage of the credit expert’s free trial of their credit monitoring service.
The responsibility is on us to know our customer and to ensure that the customer’s options are researched and the best deal presented to them. In my opinion, any broker who relies solely on the options provided by a packager (which, more often than not, will be restricted to two or three from what may be a limited panel) without being able to evidence that he has independently researched all the lenders that are available to him, is just as likely to be open to accusations of mis-selling. After all, who formally makes the recommendation to the clients and will take the rap if there is a mis-selling claim? Not the packager, I am sure. Although I would be very interested to hear if Rob Jupp will assure me that they will.
At least that is what I was going to write until I saw Keith Woodward’s letter. Although I feel he would benefit from contacting Trigold to learn about ENC, creating lender panels and the property screens, I could not ignore the main point of his letter. Not being able to delete a lender from sourcing results is a good feature to me. It forces me to record on the client file the reason why I did not recommend the deal that may appear to be better for the client than the one recommended. Sourcing results are good records of research and I would expect that most brokers these days save a copy of the sourcing results to the client file and not just the Key Facts Illustrations (KFI) provided.
The adverse market is a lot easier to be active in than it used to be, but it still requires a different skill set to most prime mortgages and Keith illustrates perfectly how a packager can help those without experience of the adverse market to help protect themselves. He also supports Rob Jupp’s point that the chosen packager should have a wide enough panel of lenders for their ‘protection’ to be meaningful. I used packagers as part of my learning process, as well as making a point of seeing every adverse lender business development manager I could; but this was pre-Financial Services Authority (FSA) days with fewer lenders and schemes available. I still use both to help support me and think this is increasingly important as new lenders and new schemes come into the market.
Packagers do have their place, both for the inexperienced or low volume adviser as well as the experienced adviser – no one should rely on sourcing results, cascaded decisions or packager recommendations in isolation. That’s why there is more to being an adviser these days than getting CeMap, a sharp suit and Trigold – and I think I need to learn to rise to the bait a little less often.
Michael Curran
Independent mortgage adviser
Affordability issues
Dear Sir,
I agree with the tenor of this article, ‘Income multiples vs. ability to pay’ (MI Online, 10 October), which reflects concerns I have as an IFA. Whereas it often makes sense to use an affordability calculator, removing the income multiplier guidelines is making it increasingly difficult to have a meaningful conversation with clients about the likely level of borrowing available to them.
I have many clients who, quite sensibly, enquire about their mortgage before looking for a property. I recently gave an indication to clients of their borrowing capability, and a current, favourable interest rate with one major lender (following its own guidelines) only to find out at AIP stage that, despite publishing income multiples, it had recently moved to an affordability calculator. The clients required £120,000 mortgage (well within their capabilities), but came out a ridiculously low £52,000. When I tried another (similarly named) lender, with an established affordability calculator, they came out at £160,000. Where is the consistency?
Andrew Hurst
Via e-mail
Not playing by the rules
Dear Sir,
What is the point of agents creating a deadline date for bids on property if they do not play by the rules?
Just one example. I had details of a site in Surrey from one of the large estate agency/chartered surveying firms on which the closing date was to be on Monday 25 September.
I had retained clients rushing around, putting together their offer and I e-mailed the selling agents just to let them know my clients may contact them directly to ask a couple of last minute questions.
Thursday, prior to the deadline, the selling agents e-mailed to say the land was sold the previous day.
My query is, how that can be if the deadline is not until the following Monday, after which all bids should be opened and considered by the vendors?
How many other potential buyers totally wasted their time and money, as do we retained agents, simply complying with the conditions of sale to be let down by deals being struck before anyone else gets a look in?
Just like that Panorama programme about bent football managers taking bungs, estate agency must be just as bad. I know I have been approached many times by developers asking that I give them first option. But I refused to play that game. As far as I am concerned, I don’t care who buys a site, providing they simply do just that, buy it and not mess around. They also promise finders fees if, as an agent, the seller is not paying a commission, but then do not keep to their word.
As an estate agent, I also must ensure any seller that their site or property has been offered to all buyers, not a hand-picked few.
I have been told before that I am too honest and I must admit, I have not made a lot of money out of estate agency but at least my conscience is clear.
Another issue is when a vendor gets planning permission on a site knowing there is a covenant preventing any extra development and then markets it as having full consent. There are sometimes ways around that, but it all adds to expenses and further delays.
Richard F Grant.
Looking at Canadian LTVs
Dear Sir.
In response to the article ‘Assetz highlights Canadian ski opportunities’ (MI Online 10 October), the Canadian Hills are a great investment but it is key to note that Canadian lenders view recreational property at a 65 per cent loan-to-value (75 per cent with strong UK credit, income and assets). When dealing with Condo-hotels on the ski hills, most Canadian lenders will not lend. Credit unions and trust companies are best for these but expect conservative terms compared to the UK and Europe.
Kevin Fleury
Conti Financial Services
