Alliance & Leicester's admission that it will restrict the number of principals it deals with after M-Day has prompted concerns as to whether it and other lenders are ready for October 31 and beyond.
A&L says that while it has a serious commitment to both lenders and brokers, its top priority is to be compliant.
Head of mortgage intermediaries Mehrdad Yousefi says: “We are not in a position to trade with every principal from day one. It would be irresponsible for a lender to say it can deal with everyone.”
Some industry figures have suggested that the cost of having compliant back-office systems is causing headaches for many lenders but Yousefi is confident that A&L is on track.
He says: “We can guarantee we will be ready for mortgage regulation. The only thing holding us back is the fact that many intermediaries still do not know their FSA numbers and are still relying on MCCB numbers.”
Whitehall managing director Ian McIvor says he suspects that some of the more established lenders which have had to have a complete overhaul of their systems may not be prepared.
McIvor has been surprised by the number of lenders which are not ready to pay procurement fees directly to the network and not to each individual. He says: “Mortgage companies are still far behind with their systems. It quite likely comes down a question of cost.”
But Charcol technical director Ray Boulger says the main problem may be stemming from the reconstruction of KFIs. Lenders have the option to pay the full procurement fee to the network or pay a portion of that fee to individuals.
He says: “KFIs have to list how much is being paid and to whom. If the procurement fee payments are being split into, say, two amounts, this has to be declared on the KFIs This could be an area where some lenders are under-prepared. I am sure some are quite late in the construction process.”
A&L says the restriction of the number of intermediaries it deals with has nothing to do with its back-office systems although it will look at restarting business in January with brokers it drops next month. The firm says it is clear it wants to maintain business with intermediaries with whom it has strong relationships and who will help to bring in profits.
Chadney Bulgin IFA David Thomas says he has been in a number of meetings with A&L and he believes it wants to cut off the bottom 20 per cent of brokers from whom it gets little business.
Thomas says: “It is obvious it wants to work with firms with which it has good relationships and with whom it can get business. But it is also understandable that it may not wish to continue with a broker who gives them only one mortgage a year.”
Alexander Hall chief operating officer Andy Pratt says there are several lenders contemplating a similar approach. He says lenders are trying to focus on key intermediaries and how they will work with them after M-Day.
But the question surroun-ding the issue is whether intermediaries can still confidently say they are offering whole of market advice if they are being restricted from dealing with certain lenders.
Pratt says there are still options open to intermediaries by joining mortgage clubs or networks but concedes that for those smaller intermediaries who do not have strong relationships with lenders, they may feel as if they are being left out of the equation.
Mortgage 2000 managing director Sean Hornsby takes the matter one step further. He says: “How can A&L still call themselves a nationwide len-der? By restricting themselves from some intermediaries, they are by default restricting customers.”
The directive by A&L is not necessarily anything new. An IFA tells Money Marketing that Halifax currently gets 70 per cent of its intermediary business from about 17 sources although Halifax would not confirm the figure. There is clearly a consistent focus on big relationships across the whole mortgage industry.
Nationwide admits that in the run-up to M-Day, it to is focusing on major relationships. Press officer Joe Wiggins says although Nationwide is always ready to look at forming new relationships, it makes sense to deal with those which are more profitable. Wiggins hastens to add that Nationwide is not being restrictive.
Skipton Building Society head of media relations Jennifer Holloway says: “There is certainly no policy at Skipton to cherrypick the intermediaries we deal with. It does not seem quite fair. After all, you never know what a broker will achieve from one year to the next, no matter how small they are.”
If more lenders take the A&L approach to intermediary business, the only route left open to them if they want to continue dealing with these lenders is to join a network or club. Either way, the lender benefits. It can choose to strategically place business with a selected group of brokers. Otherwise, it can go to clubs or networks and deal with intermediaries which are embodied within a regulatory shield.
Purely Mortgages chief executive Mark Chilton says: “This is likely to become a growing issue. Whole of market is meant to be represen-tative. Moves like this could suddenly mean a proportion of brokers are not. Ultimately, the logic starts to break down for the small intermediary.”