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Lenders tell low-volume brokers to join mortgage clubs to get fees

Independent brokers doing low-volume business are being forced to use mortgage clubs by lenders, blurring the boundaries between directly authorised and appointed representatives.

Norwest Consultants principal Harry Katz was told by Nationwide and First Active that he would have to join a mortgage club to get his procuration fees. This requirement has been in effect since M-Day.

Katz is concerned that key facts illustrations will confuse clients as he will have to explain that the figure on the remuneration page includes a fee to a third party – the mortgage club – despite the fact that he is an independent financial adviser.

The Association of Mortgage Intermediaries says it is unaware that some lenders are insisting on this manner of conducting business.

Nationwide Building Society claims it prefers brokers which do small volumes to go through a mortgage club but it does not insist on it.

First Active head of national partnerships Louis Kaszczak says the firm will not deal with brokers unless they submit specific volumes. He says this cuts down on the time and cost of setting up deals and contracts and results in a higher fee for the broker.

A Nationwide spokesman says: “We are encouraging small and one-man bands to deal with a mortgage club but if they do not want to, we would never refuse to do business with them.”

Katz says: “This seems like a backward move. What costs are they saving? I still send directly to them, they liaise with me as to progress and then pay me directly, so what do they save?”

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