to deal with loans in an effective manner, secured loans are harder for mortgage intermediaries to overlook. Historically, when it comes to secured


loans, mortgage brokers have tended to fall into two camps: those who rarely encounter loan opportunities and those who actively prospect for them. More brokers are now actively searching out secured loan opportunities in the knowledge that they are easier to place than a remortgage and they can earn more commission with less hassle. Better still, every secured loan enquiry is an opportunity to offer a remortgage and vice versa.


FSa and tCF Now another dimension has come in to play, namely Treating Customers Fairly and compliance. On the face of it, this may be perceived as bad news for advisers but the contrary is true for most advisers as they will realise how simple and profitable secured loans can be when dealt with properly. How many times have we heard “don’t worry, secured loans aren’t regulated” said? But can an adviser opt out of the duty of care simply because the product is not FSA regulated? The industry consensus seems to be no. Over 90% of brokers surveyed recently


agreed or strongly agreed with the statement: “Whilst secured loans are not regulated by the FSA, where advisers


term (sometimes 25 years in a remortgage situation). With more and more


ambulance chasing claims companies springing up there is never a better time for brokers to make sure their advice is client-focused and appropriate and that includes secured loans.


by John Malone, executive chairman, PMS


With funding for the prime market not likely to improve for


are offering secured loans, should they protect themselves from future mis- selling claims by retaining evidence of their research on their client file and documenting the reason for the loan offer on an advised or non-advised basis?” Whether they are doing this or not


is another matter but there is a clear understanding that we need to deal with loans differently and simply referring clients to a loan master broker won’t really stand scrutiny. Mortgage brokers need to think carefully about how they offer loans and consider mirroring or dovetailing this with their mortgage process. If a client wishes to consider all options


to raise money or re-finance debt then secured loans must be considered alongside a possible further advance or remortgage and the evidence of any research and recommendation retained. Passing clients to a loan specialist and therefore outsourcing possible regulatory responsibilities is little defence, especially when you are up against a claims specialist. The test will be who carried out the fact find and who the client relied upon for the overall service. Whether advisers ultimately arrange


a loan or a mortgage it seems clear that treating a secured loan in a similar manner to a mortgage makes sense. Regulation and TCF is driving intermediaries to offer secured loans so whilst the products may differ, the need


the foreseeable future interme- diaries may require alternative funds to assist their clients. Second charge lending is of benefit for those borrowers whose lenders are no longer in existence and who may need the option of borrowing addi- tional funds from a secondary lender. Furthermore borrowers


currently on a lifetime base- rate tracker mortgage who are unable to borrow more from their existing lender have the opportunity to consider a sec- ond loan as they are now more competitively priced than they have been for some time.


for quality advice and a robust audit trail remains. Intermediaries should be mindful of the


increasingly litigious society we live in and take steps now to ensure they can rebuff any miss-selling claims in the future. It’s not often that more regulation can be considered good news but in the case of secured loans I think it is. Brokers can offer loans and


mortgages under the same regulatory principles to ensure their clients are properly informed and their business process is beyond reproach. Loan sourcing systems already dovetail in to the current sales process allowing brokers to demonstrate they considered a loan and why it was discounted or offered as an alternative means of finance. We can expect the paperwork and


specific regulations to be harmonised in due course and in the meantime, quality master brokers can provide loan comparison and decline records to cover the adviser’s back if required. If secured loans have previously been


a spin-off opportunity from mortgage business, perhaps now is the time to take a fresh look. The faster recovery of the secured loan sector should see more intermediaries earning more valuable commissions, better meeting their clients’ needs and having appropriate processes in place to protect their business. n


by Neil Hoare, proposition and marketing director, Pink Home Loans


　


In the traditional mortgage intermediary’s eyes a secured loan has always been seen as the poor relation to the residential mortgage or an unsecured bank loan. The past association of high exit fees and single premium payment protection insurance has had a lasting effect on the image of what can be a useful tool for a broker when helping plan a


client’s credit needs. Yes the rates can be higher


than unsecured lending and yes a broker needs to explain the deal to their client as it’s not a simple solution, but a secured loan can be more flex- ible than other lending options. Offering higher loan amounts over longer periods and to people who may have suffered a credit blip, the secured loan sits well in the advice model. When planning a solution for a client, never forget the secured loan, it can be a valuable option in meeting their needs today and in the future.


mortgAge introducer MAY 2011 47


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