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A Black and White decision

Black and White Group’s decision to pull out of the regulated mortgage market and put that part of the business into administration has met with surprise in the homeloan industry.

The firm said last week that it has voluntarily rescinded its Part IV permissions which allowed it to operate in the mortgage and insurance markets.

Black and White says it will focus on its unregulated distribution strategies such as lead generation, secured loans, commercial loans and its mortgage packaging arm B&W Gateway, which make up two-thirds of its business.

The firm company says that continued difficulties in the sub-prime sector, where most of its business was sourced, mean it is no longer economic for it to operate in the sector.

Chief executive Thomas Reeh, who has resigned with immediate effect, has confirmed to Money Marketing that the firm will be applying to put the regulated part of its business in administration.

He says: “The company is not in administration now but we are going to apply for it. The process takes a couple of weeks and has to be ratified by a court. This will affect the regulated side of the business.”

Some commentators remain confused by the firm’s new strategy. Chartwell Funding managing director Robert Winfield says he does not think there is much call for unsecured loans in the current market. He says: “Commission is higher in that sector and you do not have to do as much business but the demand is just not there. I am surprised that it has gone down this route.”

The Mortgage Practitioner sole practitioner Danny Lovey is surprised the firm decided to rescind its permissions. He says: “It seems dramatic to do so, as it is not keeping its options open to return when conditions improve.”

The announcement last week was not the first time that Black and White has faced considerable media speculation.

The broker was in the news in December after it emerged it had been the subject of a dawn raid by the FSA accompanied by around a dozen police officers.

At the time, Reeh said the visit was connected with self-cert mortgages and involved a particular lender. He said it was happy to work with the FSA.

Reeh said: “The FSA told us they had received some information so they acted in response. We fully endorse that they should follow that up but we think they were a bit heavy-handed. They apologised later for bringing the police with them but said they were concerned that we would destroy files.”

Reeh says the FSA updated the firm on the investigation two weeks ago but he cannot comment further. He maintains that the firm rescinding its permissions and the investigation are unconnected.

An FSA spokeswoman says its investigation is ongoing but it was the firm’s decision to rescind its permissions.

Brentchase Financial Services mortgage specialist Mike Fitzgerald defends the firm’s withdrawal from the regulated market, saying it has made a brave decision at an awkward time. He says: “A lot of people in the market will be asking the question, how long do we hold on for or do we fold?”

All Types Of Mortgages chairman Vic Jannels says Black and White has done the right thing for its business. “The market will dictate what will happen. How long do you keep an infrastructure in place? No one knows when the market is going to return.”

Fitzgerald believes Black and White will retrench and regroup before returning to the market. He says: “It is a shame that Thomas has left. Unfortunately, that is business. It is hard but I do think he is one of the good ones.”

But Premier Mortgage Service managing director John Malone says Black and White is setting an example for more firms to axe the regulated side of their business and move over to the non-regulated market.

He says: “All I see is an opportunity for other firms now to say, why should we bother to do all this regulation when we can make as much money in the non-regulated market with less hassle?”

Malone says this is unacceptable for all those businesses which have gone through the pain of being regulated. He says if ever there was a situation to hasten regulation in the unsecured loan, packager and commercial loans market, it is the current market conditions.

Malone says: “I hope the whole sector becomes regulated. We need to protect the consumer and that is clearly not happening in this environment. There will be a lot of people who are thinking the same as me and will lobby the Government on this.”

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