The pending Government regulation is bound to open up old debates surrounding the role of packagers and bring the level of fees paid to packagers by non-conforming lenders under the spotlight once more.
The Treasury consultation paper, Regulating Mortgages, forms part of the process of defining which firms and people engaged in advising and arrangingš mortgages will need to be authorised by the FSA, when statutory regulation starts in the second quarter of 2004.
My main concern is safeguarding the flow of applications into the business, combined with maintaining the highest quality service levels to introducers and borrowers. My big question is whether the regulation of advising and arrangingš mortgages will have a significant effect on either of these.
In the past, there have been calls for the disclosure of packaging fees to applicants, along with disclosure of the introduction fee. We have always mounted a strong opposition to this on the grounds that packaging fees are paid for the outsourced business function of administering the application. They are commercially sensitive and should remain confidential. Now, this would be simple if advisers simply gave advice and packagers just packaged. But many organisations do both ‘ to a greater or lesser degree.
In a non-regulated environment this does not matter. But now that advising and arranging are to be regulated, does this mean packagers will need to overhaul their own working arrangements to separate any functions that entail advising and arranging to be done by regulated advisers, leaving the administrative function of packaging the applications to non-regulated staff?
If this restructuring takes place, how do we safeguard service standards? In the past, packagers could find the best home for an application and, if it was declined by one lender, they could pass it on to another likely lender for consideration. If this becomes defined as part of the arranging of a mortgage, will it become bogged down with regulatory red tape? And if it does, where does that leave the reputation of packagers and lenders who pride themselves on the quickest possible turn-around times for borrowers?
It would be easy to let the machinery of regulation roll on, but if we don’t have our say, we will only have ourselves to blame if our working practices are changed in a way that is unpalatable to us. I urge you to read the material (visit www.hm-treasury.gov.uk), ask questions, and submit your views in good time.
John Prust is sales and marketing director at SPML