Private Label, the largest mortgage packager in the UK, has announced plans to merge with RFC-MSL, the lending subsidiary of US car giant General Motors, to create the first ‘corresponding lending’ company in the UK mortgage market.
The new combined subsidiary will trade as GMAC-RFC Ltd. As a corresponding lending company, it will fund its own mortgage products through public securitisation, portfolio sales and loan-by-loan correspondent lending, but will continue to use Private Label to fund products with external lenders.
Executive chairman of GMAC-RFC, Stephen Knight, said the new company will be the first of its kind in the UK, although in North America it is not uncommon for companies to be both a creator and a trader of mortgage assets.
“We hope that when we come together, the sum of the whole will be greater than the sum of the two parts,” he said.
Under this type of arrangement, GMAC-RFC will offer brokers several alternatives. When it is unable to fund a loan, it will approach other lenders and offer them two options. The lender can either buy the loan immediately or they can agree to fund the loan, but let GMAC-RFC negotiate the whole mortgage process for them before selling the loan to the lender on the day of completion. It also offers a guarantee to buy the loan back if there are problems with the mortgage.
Knight said: “We expect that the merger will allow us to cover every viable product in every area of the mortgage market.”
Commenting on the merger, Chris Holland, corporate affairs manager at Bradford & Bingley, said there would be some similarities between its operation since its purchase of John Charcol, and Private Label’s proposition.
He said: “There are some parallels between us and in the future it will be possible to go into a Bradford & Bingley branch and walk out with, say, a Halifax mortgage, but we will not be covering the same areas.”