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‘Lenders set to take on quasi-regulatory role’

Lenders will have to carry out more rigorous due diligence in the intermediary market and effectively act as industry watchdogs, says Purely Mortgages.

At a Money Marketing round table on the future of the mortgage market, Purely Mortgages chief executive Mark Chilton said he believes due diligence will be much higher on lenders’ agendas, particularly as they move towards cherrypicking which intermediary firms they want to work with in 2006.

With lenders effectively taking on some of the responsibilities of the regulator, Chilton said they will focus their distribution relationships with up to 20 or so firms.

London & Country head of communications David Hollingworth said as lenders and intermediaries focus on the quality of their business relationships, some smaller firms may have to consider consol- idation to secure relationships with lenders.

Pink Home Loans managing director Tony Jones was concerned that this development will especially affect less compliant brokers dealing in the adverse sector. If they cannot secure relationships with lenders, he believes they may try to bypass them by putting business through packagers which are “flying close to the wind”.

Chilton said: “There are still a number of intermediaries and packagers whose business models are directly opposite to treating customers fairly. I am still surprised at the little due diligence lenders do on intermediaries. If lenders go down the route we are suggesting – a partnership concept – they will have to do more due diligence in the intermediary market.”

Hollingworth said: “There is a real potential for nervousness in the market and this will be reflected in consolidation as lenders look to focus on the quality of the relationships they create rather than the quantity. Ultimately, in this scenario, it is the big intermediaries that will win.”

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