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Quality control

As lenders are increasingly putting quality of business before volume, Paul Thomas asks if this is a way of introducing proc fee cuts by the back door

Legal & General Mortgage Club says a number of lenders are looking to change their broker remuneration model to focus on the quality of business submitted rather than the volume.

Earlier this month, Money Marketing’s sister publication Mortgage Strategy reported that one unnamed lender is looking to pay brokers based on the quality of cases submitted.

In the run-up to the financial crisis, lenders were criticised for chasing volume at the expense of quality. This may no longer be the case but remuneration models do still place a significant emphasis on volume.

However, L&G Mortgage Club managing director Ben Thompson believes the shift to quality is more widespread and is being considered by a number of lenders – something he thinks would benefit lenders, consumers and the wider market.

He says: “The brokers who are in the market now are generally very good but if I could offer them one tip it would be to focus on ensuring the quality of submissions and to prepare each case as well as possible.”

Brokers are concerned that lenders could cut procuration fees and use business quality as an excuse, without providing evidence of poor quality.

Oakhurst Financial Planning managing director Frazer Horton says: “It does not sound like lenders would move towards this model for any other reason than to cut commission.

“If this is to work, lenders need to tell brokers exactly what business they want and how they want it and this needs to be easy to understand.”

London & Country associate director of communications David Hollingworth says: “In this climate, I understand why looking at the quality of business would be a key concern for lenders but I think it would be misguided for lenders to do this just as an excuse to cut proc fees.”

Association of Mortgage Intermediaries director Robert Sinclair says: “Many lenders still want volume of business but at the same time they want to ensure it is of sufficient quality.

“We are in an interesting position where lenders are assessing how to get the type of business they want. I think we are going to see change over the next 12 months and which way things go will depend on each individual lender.”

PMS executive director John Malone does not think lenders will use a move towards quality business to cut proc fees.

He says: “Lenders are looking to reward good quality business more than they have in the past but we have no reason to suspect that any lenders are going to dramatically change the level of proc fees they pay – it is simply to ensure quality is maintained.”

If lenders decide to reward intermediaries for the mix of business they submit, brokers who operate solely in niche sectors, such as newbuild or buy to let, could be unfairly disadvantaged.

Thompson has issued a plea for lenders to consider that some intermediary businesses operate in niche sectors.

He says: “We would make a general appeal to lenders to ensure intermediaries who operate in niche areas are not inadvertently disadvantaged. For example, it takes longer to complete on new- builds, where some brokers solely operate.”

The Council of Mortgage Lenders declined to comment on the issue, saying proc fees are commercial decisions made by individual lenders.


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