Few people dream of a career in mortgages but many young men dream of representing their country on the football pitch. HML chief commercial and finance officer Neil Warman has managed to achieve both.
A talented young footballer, Warman played for Southampton schoolboys but the highlight of his sporting career came with caps for England schoolboys and England’s university team. He also spent a year playing football in Florida as well a stint with Yeovil Town.
He says: “I thoroughly enjoyed playing football, but my body gave up on me and I realised I had to fall back on my brains and not my feet, so I went into accounting.”
Warman did not enjoy the rigours of auditing and quickly found his way into investment banking, working with US investment giant Bear Stearns, where he helped set up its lucrative European mortgage securitisation desk.
“At the time, the non-conforming sector was expanding rapidly in the UK, so we zeroed in on that. We offered short-term finance to the specialist lenders and then effected securitisations into the capital markets.”
He left during the mortgage securitisation boom to join Bank of America to create an audacious mortgage proposition. “I was brought in to help set up its mortgage referral programme for its MBNA’s business – it was the biggest credit card provider in Europe with around 10 million customers. The idea was to cross-sell mortgages to the credit card base. You usually get low penetration rates when you sell from unsecured into secured, but high penetration rates are unnecessary when you have such a huge customer base.”
Unfortunately for Warman, the sub-prime mortgage crash and credit crunch laid waste to BoA’s plans. Having just come from the heart of the sub-prime securitisation, he admits the crash was not much a surprise but the speed it hit the UK mortgage market certainly was a shock.
Warman does not blame the funding system for the crash, nor does he blame the lenders. “Capital, cash and credit were at the forefront of everything. People had a lot of money to deploy, people wanted houses and lenders wanted market share. It was always going to be a bubble but everyone was on the gravy train.”
Although the crash stopped plans to cross-sell mortgages, Warman thinks it will not be long before the big UK banks take up the idea.
“I think you could try to sell secured loans to unsecured customers again, as we tried at BoA. People are now looking towards a single customer view, how they improve the customer experience and looking at how cross-selling can work. Lenders with a big brand and a strong retail presence in the UK will be managing their portfolios in that way.
“Virgin and Tesco, for example, are more interested in the brand than volume and will make sure the brand reflects the quality customer experience. That is the key – it has to be about the voice of the customer and working out how you keep the customer for the long term.”
At the start of 2008, Warman found a new opportunity in the market with HML. Based in Yorskhire, the business is part of the Skipton Group and offers management and administration of mortgages.
“Mortgage servicing was an interesting place to be in the cycle. I wanted to be at the forefront of the decision-making at a company level rather than mortgage desk level.”
HML’s workload and presence in the mortgage market grew rapidly after Warman joined, as many lenders discarded their books when they hastily left the market and many looked for help in managing arrears-heavy books. “Three years ago, it was all about origination – it was about speed to market, origination and then flip the loan, securitise it and sell it. But overnight, the focus shifted 180 degrees away from origination and on to credit management. HML was adept at changing its lending staff to become almost collectors and credit managers.
“The whole shift moved away from speed to market to that of TCF, regulation and collections. That was a massive change for the industry and it took people a while to repoint their business around.”
That shift has been lacking in some areas and last year the FSA revealed that four UK adverse mortgage lenders had been treating some defaulting borrowers unfairly. But Warman says this is an issue for the lenders, not the administrators of the mortgages: “The borrowers are not our customers, our relationship is with the lender. We are in communication with the regulator and we adhere to TCF in a regulatory environment.”
Warman says the changing mortgage market is offering mortgage and credit management many more opportunities.
“Big consolidators in the industry have lots of legacy portfolios. That opens up massive opportunities for us in terms of tidying up the market for the big players.
“The other area is the new banks coming to market. They need access to mortgage and savings capabilities very quickly but they do not have the desire to have the mortgage infrastructure. We are talking to the new entrants and it is a big part of our new business pipeline.”
HML is also working with private equity and hedge funds to finance mortgage books and Warman says: “They recognise there is good value in the mortgage area but these are non-regulated entities so we have developed a proposition whereby some of our other regulated entities hold the legal title and provide the regulatory oversight to HML and we do the servicing.”
Warman is confident that the mortgage market will return with the help of new cautious securitisation but he says the most important legacy of the crash is for future mortgage borrowers.
“We have better clarity in dealing with a borrower in arrears now. It was fairly irrelevant when we had a massive house price increase because there was enough equity but now the circumstances are very different. We will be better organised.”
Born: Hemel Hempstead, 1973
Education: Florida Institute of Technology, Southampton University, Association of Chartered Certified Accountants
Career: 2008-present: chief commercial and finance officer, HML; 2007-08: deputy head of mortgage principal finance, Bank of America; 2001-07: managing director on the mortgage trading desk, Bear Stearns; 1998-2001: financial services division administration, Arthur Andersen
Likes: Sport, films, travel, white burgundy, football
Drives: Porsche Cayenne S
Book: Liars Poker by Michael Lewis
Album: Any dance music
Career ambition: To leave a lasting legacy
Life ambition: To be the best father to my daughter I can possibly be
If I wasn’t doing this, I would be: A sommelier or running my own vineyard