Non-conforming securitisation lenders deny they are at risk of losing their top business development managers to balance-sheet lenders even if the current market conditions continue in the fallout from the US sub-prime crash.
The reaction comes after John Charcol senior technical manager Ray Boulger claimed last week that BDMs could become demoralised at being unable to sell business proactively as many securitisation lenders raise rates and change criteria to try to stem new business.
Boulger says: “If this situation prevails, what are BDMs going to be able to do if they are not allowed to sell? Good BDMs are in short supply so they will be an obvious target for lenders wanting to strengthen their intermediary process.”
He says that BDMs at securitisation lenders will be concerned about their bonus structures if they cannot able to earn commission and lenders will also be concerned about the cost of maintaining big salesforces who are not able to sell.
GMAC-RFC corporate relations manager Julie Gaskin says it is inevitable that bonuses will become an issue but he believes it is too early to be talking about it. She says: “We have not talked about changing this at the moment as we just see the market conditions as a blip so it does not need to be looked at at this stage.”
The last few weeks have seen GMAC make a range of changes to its sub-prime lending criteria. It initially said it would no longer be accepting unlimited adverse business and would be reducing its maximum loan to value from 95 to 90 per cent.
But last week, the firm sent an email to its packaging partners saying it it is considering dropping its maximum LTV to 75 per cent, a massive drop for a top 10 mortgage lender.
Gaskin says: “From our perspective, our biggest asset as a business is our staff. We recognise it is extremely important to keep them all fully informed so they know what is happening in the business and to take the panic out of the situation. The last thing that anyone wants is for staff to jump ship. It is a phase and it will be over soon.”
Infinity Mortgages, which recently had to postpone its relaunch into the market after withdrawing its products at the start of August, is adamant that it will not be losing any BDMs.
Head of marketing Simon Biddle says: “Our BDMs are a fabulous team and they are very loyal to us. We have still got a significant volume of post-offer business to deal with at the moment so while we do not have new business coming in, our BDMs still have a lot to do.”
The firm, which was previously funded by Investec, says it is still not sure when it will be re-entering the sub-prime mortgage market. Biddle says: “We are not going to put a timeframe on when we will re-enter the market as we do not want to raise hopes and dash them again. We have learnt from our previous mistake. We think that between the middle of September and early October the securitisation market will settle.”
Biddle would not comment on whether Infinity is currently paying only a basic salary to its BDMs. He adds: “The only thing I will say is that our BDMs are very loyal.”
But Homeowners Mortgages managing director Mark Chilton believes that smaller lenders that are more severely affected are likely to be more vulnerable to staff leaving.
Accord managing director Linda Will points out that those working for smaller lenders could be more concerned about their company’s ability to remain competitive. She says: “It is very difficult to turn the tap back on once you have deliberately turned it off. All those issues will be undermining confidence.”
She says the last thing that lenders will want to do is to start a bidding war for BDMs, as was the situation 18-20 months ago when a number of new lenders entered the market and lured BDMs from other lenders.
“Those lenders pushed basic salaries up massively then and I think they are going to be making a huge effort to protect themselves and make sure they keep hold of their BDMs after fighting so hard for them,” says Will.
She suggests that they might look to compensate their BDMs in one form or another for their downturn in commission earnings.
Chilton says it is inevitable that there will some instability in the market. He says: “The BDM market is highly competitive and there will be people feeling very uncertain. But a BDM working for a non-conforming lender and selling sub-prime products is a different kettle of fish to those that work for conforming lenders.
“Balance-sheet lenders will have very limited appetite for anything other than lightadverse business and this is where wholesale lenders will be needed to deal with the heavier type of business.”
Boulger points to the Nationwide, which has recently taken over Portman Building Society, as a balance-sheet lender which might swoop for rivals’ BDMs.
Nationwide non-retail executive director Matthew Wyles says: “We have announced that following the merger between Nationwide and Portman we will be establishing a brand new salesforce for Nationwide. We would welcome any applications from business development managers at lenders that are experiencing difficulties in the current climate.”