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Brand and deliver

by: By John Prust, sales and marketing director at SPML
  • 17/11/2003
  • 0
Branded lending is a fast-growing phenomenon, with an increasing number of packagers entering the market - but what are the key issues for advisers?

How does branded lending work?

Branded lenders are strategic packager partners of lenders and are able to develop their own lending brands, under which they can market and sell products that are funded by the source lender. A close relationship between the source lender and branded lender is developed, where the source lender provides in-house underwriter/s and processing staff to the branded lender. This is accompanied by access into the source lender”s own computer systems, and all these close links enable very fast decisions and completions to be made. The branded lender retains complete control of the lending process, making offers from their own site and liaising with the solicitor. The source lender only becomes involved at the very last stages.

What is the benefit of branded lending to the lenders?

Mortgage distribution frameworks are likely change and develop – driven mainly by Financial Services Authority (FSA) regulation and fast-moving advances in IT. Traditional broker/packager relationships are likely to alter – depending on how individual intermediaries want to be authorised. Networks are likely to see growth, as many intermediaries may be looking for Appointed Representative status under an experienced and expert principal. However, no one knows anything for sure at this stage.

Therefore, we are currently at a point when all lenders are looking to secure distribution. Strategic packager partnerships involving both branded lending and remote processing put in place strong working relationships underpinned by agreements that guarantee minimum sales levels. Added to this, lenders will only enter into these strategic partnerships with packagers who deliver high quality packaged cases. So if more of the lender”s business goes through its branded lenders and remote processors, then the quality of its own loans should be maintained at a high level.

What are the benefits for the branded lender?

The branded lender and/or remote processor has the added benefit of the lender”s underwriter/s and processing staff on its own premises, plus direct access into the source lender”s computer systems.

This means that it can run a seamless and efficient packaging and lending operation regardless of whether it is a “broker only” or “direct to the public” operation. For the branded lending partners there is the added freedom to promote their own brand as much as they wish, without being reliant on the source lender”s brand marketing strategy. Becoming a lender”s strategic partner for branded lending and/or remote processing also helps to enhance the packager”s own profile, as it does denote a recognition of the packager”s own high quality standards.

What is the difference between branded lending and correspondent lending – and where does remote processing fit in?

Correspondent lending was the first generation of this kind of lender/packager partnership. Here, the packager – who was branded as the “lender” – used its own brand to market the loan to customers, and the original lender who was providing the funds may have been unknown to the borrower until the deal was completed. We have now moved on to branded lending, where the funding lender is visible to the borrower throughout the process. For example, branded lenders always highlight that the loan is in association with a named lender in all their customer and broker literature.

Remote processing is, in effect, branded lending without the branding. This is where a packager opts for the administration benefits without using its own brand to lend under. Many lenders prefer to use an umbrella term such as strategic partnerships to describe this new range of packager partnerships.

What are the benefits to individual mortgage intermediaries and their clients?

The main benefit to these two groups is the speed of service. If the packager partners have the added benefit of being branded lenders or remote processors, then they are no longer just the middle men, but in full control of the lending processes.

This means that they have all the information they need to answer queries and speed up urgent cases – without having to rely on the lenders to come back with an answer. The broker can then offer consistently high service levels to customers – which is obviously very important in the non-conforming sector where speed of decision and completion is often the factor which is at the top of the customer”s “must have” list. This, in turn, benefits the broker”s own reputation and potentially boosts the chances for repeat business and referrals.

How does branded lending fit in with regulation?

Branded lending has been specially designed to comply with the Mortgage Code and guidance has been obtained form MCCB to ensure all parties remain compliant. Concerns over the transparency of the sales process with correspondent lending are overcome with branded lending.

Similarly, under the FSA regime, branded lending is likely to evolve. Some branded lenders may even apply to the FSA for authorisation as a lender. Others will continue to operate as branded partners under authorisation as “arrangers”. There are no additional rules to cover branded lending, which is really a matter of the lender outsourcing the initial phase of the lending process to the strategic packager partner. The source lender would continue to work closely with the branded partner in all areas, including compliance. All the rules for giving mortgage advice apply to branded lending in the same way as they do to conventional lending.

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