GMAC-RFC is offering a new non-conforming mortgage range in a bid to reaffirm its position as the number one lender in this sector.
Head of marketing services Jeff Knight says: “We found that many non-conforming clients had minor adverse credit and we have designed a range that meets their needs in terms of rates and criteria while retaining the ability to help all other clients too. What we have done is simply applied mainstream features to our new range.”
This new range has rates that start at 5.24 per cent for its near-prime product, reverting to the Bank of England base rate plus 1.74 per cent, with a redemption period of two years.
Knight is keen to emphasise that GMAC-RFC's philosophy is to provide “mortgages for everyone” and since launching in the UK in 1998 targeting the non-conforming sector, it has marketed across all areas of the market.
Its non-conforming business accounts for about half of the mortgages sold which has contributed towards the fact that GMAC-RFC is currently the UK's 13th-biggest mortgage lender, last year completing £4.8bn in mortgage loans.
Knight says GMAC-RFC will keep its position in the non-conforming market while growing its mainstream business as it seeks to achieve its aim of gaining a top 10 position.
At present, the company's marketing is concentrating on this goal while working towards shifting intermediaries' perceptions of GMAC-RFC, from one operating in the non-conforming market to a lender operating across all sectors. Knight says: “We are much more than a non-conforming lender. Buy to let, for example, is a large part of our business.”
GMAC-RFC is known for its product innovation. For example, its self-cert does not ask for income details but Knight explains: “We use technology to aid the decision and have extra hurdles and other, arguably more predictive, checks for the lack of income confirmation. Besides, attitude to credit is probably the most important predictor to a lender in terms of possible future delinquency.”
The aim of the introduction of a 25-year fixed-rate product in February was to test whether there is a market for a long-term fixed-rate mortgage. Having an American parent company, GMAC-RFC called on its experience of the US market where 25-year fixes are more common. The product, at 5.95 per cent, gave GMAC-RFC a valuable insight into the market until it was withdrawn in April when rates increased.
Knight says: “It was quite clear it would take some time to shift people's thinking away from the short term. Although it had a seven-year tie-in, the way the product was structured meant that you could take part of it at a variable rate with no redemptions.
“I definitely think there is a market for it and I do not think that people are aware of all the benefits. If rates increase, borrowers might take it into account and I think that other lenders might introduce longer-term fixes in the future, not necessarily 25 years, but beyond five years.”
Knight says GMAC-RFC is a “creator and trader of mortgage assets”. Portfolio sales are a major part of GMAC-RFC's strategy and it frequently passes mortgage books of mainstream, buy-to-let and self-cert products on to other lenders.
He says this market is becoming particularly appealing for small building societies and lenders that can use it to increase their assets without adding infrastructure and cost. It has ongoing relationships with Bradford & Bingley, Derbyshire Home Loans, Dunfermline, Derby and West Bromwich.
As well as asset sales, GMAC-RFC also securitises many of its loans. This is a process by which a pool of assets is converted into marketable and tradeable securities that are then sold on to institutional investors.
Knight says “By purchasing a mortgage-backed security, institutions can indirectly invest in the UK's housing stock and get a good yield compared with other investments.”
The benefit to a lender such as GMAC-RFC is that this process frees up capital which can be used for lending, reinvestment or strategic investments, such as the company's investments in National Guarantee, High Street Home Loans and most recently Mortgage Ventures Limited.
Knight says GMAC-RFC is always looking for investment opportunities and has “an appetite for investing in high-quality companies that have the right profile and a strategic fit between them and us.”
On regulation, Knight says GMAC-RFC has all its policies and processes in place, having worked towards regulation for a couple of years. He warns that some intermediaries may have left it too late and may rely on becoming appointed representatives, although he believes this route does not offer any guarantees.
He says: “I believe that what we see on November 1 will change again. I call it shifting sands. Some appointed representatives will change their minds about what to do, as will those who become directly authorised. They will not know what is right for them until they start doing it. It will be some time before we see the market settle down.”
GMAC-RFC is intent on becoming a top 10 lender but as Knight says it will do so at a controlled rate as the company does not want to experience service issues which some lenders, such as The Mortgage Business, have gone through this year.
He says GMAC-RFC plans to expand its online propo-sition and describes web-based trading as an “integral part of the company's future”.