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Mutual trends

Mortgages plc is not shy about describing itself as “punching well above its weight” and being able to take on the likes of GMAC-RFC, the biggest operator in the non-conforming sector.

Launched in 1998 and aiming at borrowers who fall outside mainstream lending criteria, Mortgages plc says it keeps its profile high and increases its volumes of business through a range of initiatives to break into new parts of the market, like its recent creation of Mutual Co-operative.

This involves Mortgages plc working with a group of medium-sized regional building societies to design products and criteria and pre-agree terms and volumes of business they want to do. It then sells the mortgages and passes the assets on to the societies.

It says this is a way for a mutual to get involved in new types of lending such as light adverse sub-prime with new clients and help them compete with bigger players in the market.

Mortgages plc sales and marketing director Peter Beaumont says: “We have come up with the first range of products, which will be &#39superlite&#39 near-prime loans for people with very minor credit problems. We will compete head-on with the likes of GMAC-RFC, The Mortgage Business and Platform Home Loans.”

He is confident that the idea will work to the benefit of Mortgages plc and the Mutual Co-op members, saying: “I strongly believe this is a win-win situation which you do not often come across in business – we need it and they need it and have the appetite for it.”

As Mortgages plc does not do any lending direct to consumers, it realises the importance of always looking at ways to boost its distribution through packagers. Brokers are helping them cope with changes in the market, such as impending FSA regulation in 2004.

Currently, 75 per cent of its distribution is through packagers, 15 per cent through brokers and the rest is correspondent lending.

It expects the balance to shift slightly away from packagers due to confusion caused by regulation and improvements in technology which could reduce the need for lenders to have difficult cases packaged.

But it is doing all it can to help packagers face the threats that regulation might bring and recognise the opportunities by holding a series of workshops around the country in March.

Beaumont says: “The theme of the workshops is the ostrich syndrome leading to the dodo effect if they ignore what is happening. People have talked about packagers facing extinction – the simple truth is that for those who do not plan for the future that may become a reality.”

Another threat that packagers must face up to is technology.

Beaumont says: “Sourcing systems do not accurately place sub-prime business at the moment, so skilled packagers are needed – but this will not always be the case.”

Later this year Mortgages plc is to launch its Elite label which will make it clear to packagers what level of business and service it expects from them. If they do not deliver, they will no longer be recognised as Elite and it will stop doing business with them.

But it is keen to emphasise this is not like BM Solutions&#39 seal of approval for packagers created last year, dismissing this as opaque and exclusive.

Beaumont says: “With BM Solutions&#39 seal of approval, the rules and requirements were never published. Elite will not operate like a club, it will be totally transparent and packagers will be reviewed and removed if they do not make the grade.”

Since its investment from finance firm Nikko Principal Investments just over 12 months ago – which raised £40m – Mortgages plc sees itself as one of the top five lenders in its market, alongside GMAC-RFC, Kensington, Southern Pacific Mortgages and Platform.

It believes the capital has allowed it to transform itself over the past year by expanding its range of products and investing in staff training to create what it calls a “best of breed culture”.

Beaumont is adamant that Mortgages plc will not rest on its laurels and will continue to look at new ways to keep growing.

It intends to do this by adding to the number of panels it is represented on, which currently include the likes of Misys and Prudential Premier Mortgage Service, through more branded lending with packagers like Solent and The Mortgage Placement Company and receiving referrals from high-street banks.

Beaumont is bullish about the future, saying there is still lots of mileage in the sub-prime market, even though he does predict some slowdown in the housing market. He says: “The sub-prime market is still relatively new here compared with the United States. Our sector will continue to grow as debt-laden consumers with damaged credit ratings look to remortgage to get out of debt.”

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