Do mortgage packagers have a future or will lenders and brokers
fulfil the role of packagers themselves using improved technology?
Snowdon: Packaging mortgages properly is not just about increased
technology. It is also also about understanding lenders' criteria and
submitting the correct documentation so that they can consider the
application quickly and efficiently without having to refer back for
Those brokers who are equipped to do so are already packaging. With
regard to lenders, it depends on their business philosophy. Some will
prefer in-house packaging and some will prefer to outsource this
non-core activity. At Verso, we use a mixture of the two methods.
Smith: With continuing pressure on margins in all aspects of
financial services, it is inev-itable that lenders will want to
automate and delegate admin services as far as possible. In the short
to medium term, this may benefit packagers but in the longer term,
with more sophisticated valuation and credit-scoring tools, much of
this work can be done automatically and in an ideal world this would
be by the broker at the point of sale.
Court: Many lenders are already reducing the number of packagers they
deal with and improvements in technology will probably reduce the
need for packaging in the future.
Will the planned Association of Mortgage Packagers have any weight to
lobby the regulator and influence the future of mortgage advice
regulation, as it says it intends to do?
Snowdon: No trade body will have any credence unless it can
demonstrate that it truly represents the interests of the majority of
operators in its particular field. This means that, for a trade body
to carry weight with a regulator, it must have the majority of
relevant firms in its membership. Regardless of whether a packagers'
association gets off the ground, a bigger issue is the regrettable
lack of progress in setting up a body to represent mortgage brokers.
Smith: All informed voices that wish to contribute to the debate
should be welcomed. The extent to which they can influence will be
measured by whether they are talking sense in light of the
regulator's wish to improve consumer choice and information.
Court: Any trade body which involves itself in such lobbying will
probably have more impact than individual firms could hope to have in
their own right. Clearly, though, such a body would only be one of a
number of interested parties trying to influence the ultimate shape
of mortgage regulation.
Do you think one common trading platform for mortgages will be
achieved or is there more likely to be a split between the two
biggest ones – IF Online and Mortgage Brain?
Snowdon: Competition is one of the great strengths of the UK mortgage
market. It is neither desirable nor likely for one platform to corner
the market. Abbey National's recent stake in IFonline shows that as
long as diversity is seen as a business opportunity (to say nothing
of competition-authority issues), then monopoly is unlikely.
Smith: Any organisation that sets out to produce one common trading
platform will probably fail – the industry has a pretty poor track
record on working together in this area, after all. In addition, as
in most areas of business, competition is good and provides the
stimulus for improvement and the maintenance of standards.
Apart from the two listed, the direct links between lenders and key
intermediaries that exist will also play a role, particularly where
both parties can see a benefit to their business volumes, and other
organisations, both current and new, will doubtless have their plans.
Court: It is more likely that there will be at least two suppliers of
Do you think there will be any losers when the FSA starts to regulate
mortgage advice in 2004 and, if so, who will they be?
Snowdon: It is very hard to say as proposals are now back in the
melting pot. The requirement for practising mortgage advisers to be
fully qualified with effect from January 2003 may well see some
“losers” in terms of brokers who cannot or will not pass the exams
being excluded from the market. But this will strengthen the sector,
not weaken it. It will also pave the way for the FSA regulation of
advice as we can be confident that those introducers remaining in the
market will be both committed and competent when it comes to giving
Smith: Firms that have not got their act together on the existing
MCCB requirements will be the losers but they will hopefully be few
by the time this formal regulation comes into force. Between now and
then, mortgage advice will have already been shaken up by the
requirements for qualifications and fitness and competency that are
now part of the MCCB regime.
Court: The precise areas of impact are hard to determine until we
know the exact form the regulation is likely to take. Clearly, this
will be a significant additional burden for introducers and will
probably result in further consolidation in the industry.
Why do you think the Treasury made the unexpected decision that the
FSA will regulate mortgage advice?
Was it primarily due to lobbying by the CML, as it is claiming?
Snowdon: Of course, the FSA cited European issues and the DeAnne
Julius report as a major factor in its U-turn on mortgage advice.
However, it would be very surprising if the tremendous lobbying led
by the CML, supported by individual lenders – who all took a lot of
time and trouble in researching and submitting their own responses to
CP98 – failed to register on the FSA's radar.
Smith: There were very many parts of the industry that played a role
in challenging the original proposals. The CML was certainly
eff-ective in showing that the lending industry presented a united
front but the criticism in the DeAnne Julius report on codes was
probably the major factor in the Treasury taking a second look at the
Court: CML lobbying played a significant part, together with
individual responses to the consultation. EU legislation, to the
effect that all general insurance would have to be regulated by
statute, may also have been a significant factor.
How do you see the future of the CML and MCCB with the FSA regulating
Snowdon: The CML has no jurisdiction over brokers and the advice they
give nor does it represent them. It is a trade body for lenders and,
as such, will continue unchanged.
With regard to the MCCB, I hope that the FSA will want to incorporate
its structure and practice into any new framework rather than
Smith: The MCCB has done much to improve the standard of mortgage
advice being given in the UK and to improve the professionalism of
It is to be hoped that the FSA regime, when it comes in, builds on
this good work but maintains a light touch to this area of regulation
so as to ensure continued widespread availability of advice and
competitive products. The CML itself will have a continuing role to
play as an active and effective trade association for lenders.
Court: It seems likely that the MCCB will ultimately be subsumed into
the FSA. The CML existed as a trade body long before the Mortgage
Code, and will doubtlessly continue to fulfil this role after