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Bolton backlash in rates for fees row

Sub-prime lender BM Solutions&#39 head of lending Michael Bolton has been criticised by rivals after accusing them of charging borrowers excessive interest rates to pay brokers higher procuration fees.

He provoked the wrath of rivals by hitting out at the practices of “traditional sub-prime lenders” at the Efficiency & Excellence in Mortgage Processing conference in London last week.

Bolton attacks the mortgage code for allowing some lenders to pay fees to intermediaries of up to 8 per cent of the loan and then hit borrowers with an increase to rates of around 5 per cent when the discount periods end.

He also warns brokers of the dangers of relying on this income which may be lost when Treasury regulation is introduced in 2004.

Platform Home Loans chief executive David Tweedie, who took part in the debate, disagrees with Bolton&#39s claims, saying the slightly higher rates are due to pricing for risk. He admits that intermediaries may get minimally better procuration fees for the additional work involved in processing non-conforming cases.

IF Online sales manager Colin Preston says he has never encountered broker fees of up to 8 per cent and interest rates are not directly related to funding of intermediaries.

At the conference, Bolton claimed the entrance of brand names such as BM Solutions into sub-prime would encourage more intermediaries to get involved in the sector.

Bolton says: “Under the existing mortgage code, there is no requirement for the full acquisition fee to be revealed. Lenders are already in dialogue with the FSA about this issue. Typically, borrowers going to sub-prime lenders are in a distressed situation and regulation has to ensure that they are in an informed position.”

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