Blenders
money from private investors is legitimate.”
Smethurst suggests if white labelling in the bridging market follows a similar market curve to the historical sub-prime days it would lead to greater competition on price where the price does not necessarily reflect the level of risk involved.
“Looking back to how the sub- prime sector developed, I think too much risk was delegated to third parties without the most appropriate controls, checks and balances,” Smethurst says. “I would not want that learning to be skated over, or perhaps ignored, in a scramble for new bridging business.” Masthaven’s managing director
Andrew Bloom raises another grey area for blenders white labelling. It seems there are instances of brokers arranging finance under their own brand on behalf of
FSA: THE GOOD AND THE BAD GOOD PRACTICE
„ Regular assessments of correspondent banking risks taking into account various money laundering risk factors; ownership/management structure (including the possible impact/ influence that ultimate beneficial owners with political connections may have); products/operations; transaction volumes; market segments; the quality of the respondent’s Anti Money Laundering systems and controls and any adverse information known about the respondent.
„ More robust monitoring respondents identified as presenting a higher risk.
„ Risk scores that drive the frequency of relationship reviews. „ Taking into consideration publicly available information from national government bodies and non-governmental organisations and other credible sources.
POOR PRACTICE
„ Failing to consider the money-laundering risks of correspondent relationships.
„ Inadequate or no documented policies and procedures setting out how to deal with respondents.
„ Applying a ‘one size fits all’ approach to due diligence with no assessment of the risks of doing business with respondents located in higher risk countries.
„ Failing to prioritise higher risk customers and transactions for review. „ Failing to take into account high-risk business types such as money service businesses and offshore banks.
14 BRIDGING INTRODUCER MAY 2012
another lender but charging a significant uplift in legal and valuation fees. “Provided that the blender is offering at least the same rates and fees as the existing lender and adding value in other areas then that is fine,” he says. “There have been some cases where the blender is looking to make large margins on rates/fees that their lender is offering which would then put the borrower in a worse off position.” Given that so many are conscious of the “grey area” this practice falls into no lender Bridging Introducer spoke to admitted to white labelling any product. Brokers on the other hand are adamant it is happening in the market. Several brokers suggested that Lancashire Mortgage Corporation had white label relationships with a few distributors although Gary Bailey, director at the
Blemain Group, says LMC had been involved in white label relationships in years gone by but things have changed. “We don’t offer true white labelling however, in the past, some of the group’s companies held special arrangements with selected distributors whose role and responsibility may have extended beyond that of a traditional broker,” he says. “There are no strategic plans to extend these arrangements however; a few longstanding relationships still exist today that have been in place for over 15 years.”
PLAYING IT STRAIGHT While bridging is still working out how to become a more professional industry there will be instances where players bend the rules. But on balance brokers who are blending are doing it in good faith to get good deals done in a market that is still tightly restricted in its appetite to lend. Consensus suggests that if
brokers want to get involved in the lending side of the equation transparency is an absolute must. Not only should brokers be sure where the funding they are lending out comes from they should be disclosing this to the borrower. Terms and conditions should be clearly defined and rates and fees in line with the funding lender rather than jacked up for personal profit. In an unregulated market there is less clarity about how these relationships should be managed. But while it’s undeniable that there is scope for abuse there is in equal measure a benefit which is officially unmeasured in this activity. While banks and lenders are restricted by funding appetite private investors are stepping into the breach and brokers or blenders are helping them. It is up to those involved to
play it straight and not blend the rules to the customer and market’s detriment.
www.mortgageintroducer.com
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