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Taking care of business

The onset of mortgage regulation need not cause admin horror for intermediaries.

The proposals set out in CP98, the consultation paper proposing the new mortgage regulations, focus heavily on regulating the level of information given throughout the entire mortgage life cycle, from pre-sale to redemption.

Currently, lenders book most business through intermediaries, so these proposals will make them reluctant guar-dians as they will be responsible for the quality of information provided to all their customers, regardless of the sales channel.

While lenders complain that they do not have the resources or expertise to be able to do this effectively, it looks unlikely that any radical changes from CP98 will be made. CP98 comes into effect no later than August 31, 2002.

All this means that mortgage intermediaries will be increasingly under the spotlight from lenders who will be unforgiving on those that make mistakes. Reputations have never been so acutely at stake. Intermediaries must ensure they are in compliance with the eventual final legislation every step of the way.

Still, this should all be worthwhile. Mortgages can provide lucrative business for intermediaries. That said, so far the number of intermediaries who have signed up to take the MCCB examinations has not been that impressive.

So at present there are around 1.5 million mortgage transactions a year and only a small percentage of authorised intermediaries.

This provides each intermediary with a huge potential market. There is plenty of inc-entive for the remaining intermediaries to ensure they are qualified to advise by Aug-ust 2002 and make sure that they get a piece of this action.

However, the worry is that the onset of regulation will prevent many IFAs signing up. So, exactly how will the new mortgage regulations impact IFAs?

The most driving piece of regulation is for clear and comparable information to be made available to consumers throughout the lifetime of their mortgages. As part of this, intermediaries must provide customers with:

A standardised disclosure document before sale, so customers are better able to shop around between lenders, and

Post-sale information requirements, so customers will remain informed about the mortgage and are made aware of any changes in costs.

And what are the consequences for intermediaries if they get it wrong? Well, truthfully, as yet no one knows. But there is likely to be some sort of fine-based system that will make mistakes costly for the intermediary.

The poor track record of support from lenders&#39 admin departments makes the pros-pect of being regulated by them deeply unattractive to intermediaries.

However, there is a solution for those intermediaries looking to sell mortgages but who want to avoid the stress of interacting directly with the lender. Business service providers – who provide a full mortgage service – can address all sizes of intermediaries who want to make a more lucrative living out of selling mortgages.

BSPs have to sit the same MCCB examinations as intermediaries in order to operate. Unlike an intermediary, however, who should concentrate on sales, a BSP&#39s specialism is to make sure the correct documents are being processed at every stage of the transaction. They can keep much tighter control over the whole administration process and ensure it is carried out according to the regulations.

Over and above traditional packagers, BSPs can provide intermediaries with an individual, tailored, outstanding service. For example, an intermediary can expect a quote by phone within minutes.

This means a quotation in principle can be provided to a customer while the intermediary is still on the customer&#39s premises. Such service will please the lender, who could be responsible for regulating an intermediary&#39s service in the future.

An intermediary can simply provide a quote, gain commitment to proceed and then arrange for the application forms to be completed.

Once sent to the BSP, the intermediary is free to focus on cross-selling other products or even to move on to other prospects rather than getting tied up in admin and regulation. This can be done safe in the knowledge that an experienced team is looking after what can be a long, complex, multi-party completion process.

Although a great many processes are being handled invisibly, the intermediary is always kept up to date. They are informed of the case&#39s progress at different stages throughout the process.

In this way they can provide good customer service by notifying the customer and thereby providing assurance that things are progressing as they happen.

When choosing a BSP, there are some key considerations. First, look for evidence of top-class personal customer service. Take a close look at their staff. How highly trained are they? How many years of experience do they have specifically in the intermediary mortgage market? Are they certified to practice by the MCCB?

Take a look at the technology being employed – especially customer relationship management systems. Are these focused on the mortgage industry? Is it just a front-end system with a delayed batch-processed link to a legacy back-office system?

A system needs to be able to effortlessly and efficiently handle the processing of mortgage applications right up until offer stage and beyond through the lifetime of the product.

So the BSP, its staff and its systems must all be focused on mortgages to provide intermediaries with an excellent personal service and make sure that they comply with the eventual regulation. A simple, large call centre operation, on its own is no longer enough.

In summary, cross-selling opportunities make mortgages a clear door opener to a lucrative future for intermediaries and there is a huge market out there which remains untapped.

So, make the most of the current healthy housing market but make sure you are not saddled with the regulation burden.

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