With strict credit-scoring criteria making it difficult for borrowers to obtain a mortgage, All Types of Mortgages believes there could be the opportunity for packagers to make a comeback.
In a recent article for Money Marketing, AToM sales and marketing director Dale Jannels said the return of mortgage packagers would bring benefits for borrowers, lenders and brokers.
The traditional role of a mortgage packager was to place mortgages, instruct valuations and build up exclusive ties with certain lenders.
nother function was that because of their relationships with lenders, they would have a good sense of whether a client’s application would be accepted before it is placed with a lender, in order to avoid unnecessary declines showing up on a borrower’s credit record.
Jannels says packagers are again ideally placed to help those who have been rejected by mainstream lenders because of their “tick-box” credit-scoring system and they can also help by following the case through to completion.
He says: “As a packager, we have access to a lot of lenders and we can guess from day one where the right place is for that case to go. When you go down the high street, you get this tick-box mentality but the specialist lenders are a little bit more relaxed and will have a look at the whole application.
“An intermediary will phone us up and we have a range of lenders on our panel, so we will have a good understanding of where that case can go from day one. Then we will package it, get the valuation instructed and push it through to completion.”
The Alliance of Mortgage Packagers and Distributors director Tony Crossley agrees with Jannels, saying the specialist lenders which packagers deal with offer a more human approach to underwriting.
He says: “Many packagers are also becoming more and more involved in complex or intricate prime cases. There is a significant marketplace of cases where clients do not fit automated credit-scoring systems. Luckily, some lenders have taken the decision to provide underwriters who can physically look at the merits of an individual case rather than simply pass or fail it.
“This does not in any way advocate risky lending but if a client can put across a reason why a lender should consider them, you can reason with a human being and not with a computer.”
When you go down the high street, you get this tick-box mentality but the specialist lenders are a little bit more relaxed and will have a look at the whole application
But Mortgage Brain chief executive Mark Lofthouse says the number of packagers will depend entirely on the number of adverse mortgage products in the market. At the moment, he does not believe there are enough to warrant an increase in the number of packagers.
Lofthouse says the total number of adverse products available has risen from 315 to 450 in the past year. He says: “There is a need for more specialist mortgages in the market, but at the moment there are not very many. But if there is an increase in adverse mortgages, that is potentially when packagers could be needed more.”
Precise Mortgages managing director Alan Cleary says that in today’s regulatory environment, most lenders are not willing to use packagers for their traditional role of packaging mortgage cases. He says if packagers make any kind of comeback, they are likely to do so as a kind of mortgage club.
He says: “If they are called ’packagers’, then they should never come back. Traditional packagers were instructing valuation, getting the case ready to offer. That is not going to come back for as long as I care to even think about. No lender is going to, in this regulatory environment, trust another entity to do that work for them – they will do it in house.”
Cleary suggests the only way packagers might make a comeback is if lenders want to use their distribution ties.
He says: “The reason why packagers may well become interesting is not because they are packaging, it is because they have some kind of access to distribution and they act as a marketing outlet for the lender. Other than that, packagers have not really got a lot of value to lenders at this moment in time.”
But Crossley says packagers have had to adapt and develop their distribution skills to work alongside their traditional packaging duties.
He says: “The packagers who remain in the market have had to evolve and add value to lenders through their market knowledge and also their ability not only to package but also distribute products. Our distribution skills can be useful both to existing lenders and new entrants who may not want to invest heavily in their own sales distribution.
“From a lender’s point of view, we are offering quick distribution and an outsourcing of administration. From an intermediary’s point of view, we are providing a human sourcing function, speeding up the process of their client finding a mortgage.”