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“Some lenders seem to be trying to drive quality. There are still too many aggregator networks who are using their purchasing power to extract higher procuration fees from the lenders without providing the necessary levels of support required for their members.” Terry McCutcheon, chief executive of Finance Planning Group
“In my personal view it’s more important to have proper support from the network rather than higher proc fees. But there should be more of a “standard” level of procuration fees – there are too many differences between lenders – and overall proc fees are too low.” Stuart Gregory, director of Lentune Mortage Consultancy
it is widely acknowledged that it’s always been incredibly hard to make money as a network. The network distribution model sprung up in a fiercely competitive and crowded marketplace where lenders were falling over themselves to grab hold of market share. When mortgages were a volume play, networks scraping one or two or even five basis points off the proc fee was a sustainable income generator. But times have changed. Networks
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are expected to deliver so-called “quality” to their lenders, which relies on investment in their subsidiary ARs. Abbey for Intermediaries has already taken the plunge and announced it will pay more proc fee for “better quality” business and consequently “penal” rates for poorer quality. Lloyds Banking Group has been reported as not
“Relying on proc fees is a mortgage broking model that is dying. We charge 0.5% to all clients and rebate any commission received, this way we are totally impartial and the actual amount we’re paid is to an extent irrelevant. Proc fees will only con- tinue to fall in the future so charge a fee. Hugh Wade Jones, director of Enness Private Clients
ruling quality-linked proc fees out and Barclays recently said while it has no imminent plans “never say never”. But if application forms are to be right first time, if submissions are to fit criteria and if supporting documentation is to be over and above what is required by the lender, ARs must be given training and support by their networks. Indeed nearly every network sells itself on offering just this type of support to member firms. But it costs money.
GET WHAT YOU PAY FOR Robert Sinclair, chief executive of The Association of Mortgage Intermediaries, says increasingly brokers should not be tempted to opt for “unsustainable” proc fees when thinking about which network they should move to. Fierce competition between networks is resulting in brokers
“The push to abolish or re- duce commissions should be encouraging brokers to choose networks that can help them generate other income through charging fees and increasing cross sells – including setting up introducer arrange- ments for business they do not have permission to write or access. Gemma Harle, managing director, Tenet Lime
being offered more and more proc fee – but that compromises the network’s ability to deliver compliance and survive. “That has implications,” he explains. “The more money that networks give away, the less money they have to put in place proper controls and run profitable businesses themselves. There has to be a balance and enough money to run the right amount of compliance controls to ensure the right kind of quality is arriving at lenders and that the regulator is happy.” Kevin Duffy, managing director at Mortgageforce, rolls out the old cliché. “If something looks too good to be true, it usually is. Brokers who select purely on the pricing tariff need their heads examined. Many do cut corners - not least because any network just breaking even today is doing very well.”
Why do so many mortgage brokers recommend TenetLime?
30 MORTGAGE INTRODUCER OCTOBER 2012
www.mortgageintroducer.com
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