Packaging services were a staple of the pre-crisis mortgage market but when lenders started to fold, demand for these firms all but dried up. But as the market recovers there is a renewed buzz coming from the packaging sector.
Some may argue that for the mainstream residential mortgage market there was never a need for packagers to add an extra layer to an already straightforward mortgage application. But for the more complex and unusual transaction they often help brokers out of a sticky spot.
The buy-to-let sector has really taken off over the last 12 months and is set to accelerate this year as lenders reach for market share. The Mortgage Market Review is expected to act as a brake on residential mortgage lending, at least in the short term and buy-to-let could fill that gap.
In this week’s Marketwatch we ask our industry experts how much value these specialist mortgage desks can add to the buy-to-let mortgage advice and application process. Or if they think brokers should be able to select the most suitable product and collect the correct supporting documents without any help.
Stuart Cunningham, head of buy-to-let sales at Norwich-based broker TurnKey Landlords, believes there is less need for buy-to-let packagers than there has ever been given the increased sophistication of lender online systems
Tony Salentino, director of packaging firm Complete FS, says a good packaging service provides accurate recommendations for complicated applications and free up the broker’s time to concentrate on working with new clients
John Morgan, financial adviser for Bath-based accountancy and IFA firm Pethericks and Gillard, finds packaging desks helpful for complex buy-to-let cases but completing due diligence on the firm is a necessity
Stuart Cunningham, head of buy-to-let sales at TurnKey Landlords
TurnKey Landlords does not use the facilities of a third party to process mortgage deals for submission to lenders.
With the introduction of automated decision-making, submission and online checking, the need for large amounts of documentation is rapidly disappearing; because of this I believe that there is less need for buy-to-let packagers than there has ever been.
Our customer journey is split into two distinct functions. Initially a qualified and experienced mortgage advisor will carry out a fact-find, provide tailored advice and recommendations and complete the customer journey up to the point of submission to the lender.
The duty of care then carries over to a mortgage underwriter who will look after the customer all the way through to completion. it will be the job of the underwriter to package and collate any required documentation for submission to the lender.
Because we offer such a comprehensive service the customer should be confident that we will sufficiently process and package their application without the need for a third party. And as we have already been intimately involved in the process up to the point of submission we are best placed to do so.
It is true that some packagers do have a handful of exclusive products available to intermediaries. However, such products are not always the best choice for the customer.
There are plenty of products available within the buy-to-let market and therefore the limited scope that goes hand-in-hand with exclusivity very rarely justifies the choice to go down the packager route.
Tony Salentino, director of Complete FS
The majority of brokers are generalists dealing with a menu of client borrowing needs for house purchases, capital raising via a remortgage or second charge, commercial premises funding, short-term and bridging finance and of course buy-to-let.
They do a brilliant job ensuring the widest number of options are included before making recommendations and as buy-to-let is a growing and increasingly specialist segment of the market, it is right that brokers should be ready to help clients in this area.
My point is that to do justice to a complex area like buy-to-let requires a lot more knowledge. Of course there are simple vanilla buy-to-lets but with lender criteria differing in many ways and the greater number of alternative lending sources to choose from, to do the job properly is a time consuming job.
Sourcing systems can only indicate, they cannot place complex types of buy-to-let by which I mean HMOs, expat cases and multiple freehold lets. So there is a lot of pressure to ensure the correct advice is given in an increasingly regulated environment.
A specialist buy-to-let desk provides brokers with a resource geared specifically to their client’s needs leaving them to concentrate on outcomes and working with new clients. Using a specialist saves them time and, if they have chosen the right one, a valuable ally in ensuring accurate recommendations.
Can brokers be their own packagers? Yes of course they can but with a sophisticated free resource available why would they want to?
John Morgan, financial adviser for accountancy and IFA firm Pethericks and Gillard
I have been actively involved in arranging mortgages for over 15 years during which time I have used several mortgage sourcing tools. Brokers know this will only ever be a starting point for further discussions and negotiations with lenders as no tool accurately covers every client scenario.
During the early 2000s I occasionally used a sourcing and packaging service to assist with complex prime and sub-prime and some buy-to-let cases and they usually offered a choice of solutions.
When I was introduced to the company I did due diligence to establish a track record as I had some concerns that the solutions might have been to their financial benefit rather than the clients.
However, the level of broker and client satisfaction convinced me to use them.
This was an excellent service as it provided some “specialist” input into the problem solving exercise, however, it was still down to me to analyse the most suitable product and make my recommendation.
As a general rule the lender’s assessment criteria for buy-to-lets is more straightforward than for regulated mortgages.
However, I feel that a buy-to-let mortgage desk would be helpful if it covers the questions and specifics which the mortgage tools do not and if it provides a choice of solutions.
But brokers must be mindful that they can delegate some tasks but cannot abdicate from the responsibility for the final recommendation.
