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Is a proc fee revolution on the cards?

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A major lender is in the advanced stages of revolutionising the way it pays proc fees, potentially sparking a radical overhaul of intermediary remuneration.

Money Marketing’s sister publication Mortgage Strategy understands the unnamed lender will pay proc fees to brokers based on the quality of business they submit.

It has developed a metric to assess different elements of brokers’ business, such as the quality of the cases they submit, how they interact with clients and their overall conduct.

This means brokers will be assessed individually rather than on the club or network they belong to and distributors will not be able to negotiate proc fees based on volume.

The lender is thought to be making the move because of the changes  in the incoming Mortgage Market Review and believes other lenders will follow in its footsteps.

Association of Mortgage Intermediaries director Robert Sinclair says brokers could soon have to choose one club to distribute the bulk of their business.

He says: “Many lenders still want volume business but at the same time they want to ensure it’s of sufficient quality.

“We’re in an interesting space where lenders are assessing how to get the type of business they want. So I think we’re going to see change over the next 12 months and which way things go will depend on each individual lender.”

PMS executive chairman John Malone welcomes the changes saying clubs could adapt to suit lenders.

He says: “Businesses like ourselves have client management systems and we are able to select certain businesses for certain deals.

“If a lender came to us and wanted to lend in a particular postcode we could do it. We could also differentiate on quality of business. Until recently lenders were only interested in volume but now they have to satisfy their risk departments more.”

Telos Solutions director Richard Farr says networks and mortgage clubs already assess the quality of their members.

He says: “In principle it is a more sophisticated option and could be a win-win for brokers, clients and lenders. The concept is good but in practice brokers could be paid lower fees. There is also concern about how consistently such a metric is applied and how judgements are made.”

He adds that lenders should not use the move to lower proc fees and that current levels should act as a average, with better brokers receiving more.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. In other words they want to lower our proc fees yet again. How about we make lenders pay a higher proc fee if they are not efficient and don’t answer their phones in a timely manner or generally nake our work more time consuming.
    Is it us who make them money or the other way round. Malone should maybe start to say thay if a lender dual prices his members will not submit business to them. A line has to be drawn in the sand.

  2. Agreed Anon,yes its all one way traffic with lenders – why not take a stand? John’s great dilemma is that mortgage clubs entertain a broad church of members which equals volume but lenders dont’ want volume at the mo, yet he has a business to protect.Hence the rock and hard place kind of routine.I can see where brokers will need to formalise arrangements with clubs to empower them to take a harder line.

  3. Anon & Mic2002,

    Why don’t you just take the proc fee issue out of the game altogether and charge your clients a fee irrespective of whether or not the lender pays you. You can then rebate the proc fee if received, widen your panel of lenders beyond those that pay a proc fee and take control of your remuneration instead of letting the banks dictate your margins. This is what i did and it works far better.

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