Don’t blame brokers for not embracing seconds – TFC

by: Nigel Payne, managing director of TFC Homeloans
  • 20/04/2017
  • 0
Don’t blame brokers for not embracing seconds – TFC
Bloated fees not brokers are to blame for the stuttering growth in second charge lending.

I’ve read and heard a lot of rubbish in the last few weeks about second charge mortgages. Over a year since they became regulated, the anticipated surge in volume hasn’t materialised.

But it’s no good blaming brokers for not embracing seconds, which is what too many parties with a vested interest seem to be doing. And it’s not helping.

Yes, of course some brokers are not up to speed with seconds and educating them is essential. But let’s stop ignoring the big, fat, inflated elephant in the room.

 

Rip-off fees

Many brokers are not comfortable recommending seconds because they believe their client is going to face rip-off fees.

And in many cases, I think they’re right.

The biggest problem with second charge mortgages is the inflated fees charged by many so-called master brokers and certain packagers.

TFC Homeloans has a clear, fair and transparent fee structure across all regulated products, including first and second charges. A handful of other firms have moved to a clear, flat fee structure too.

If some of us can do it, how can others still justify fees of up to £5,000 on a £120,000 loan?

I don’t think they can.

 

Regulating the market

The regulator wanted to put second charge mortgages on a level playing field with first charges in March 2016. Some businesses have taken that seriously and made changes, and more will follow, but plenty are hanging onto high fees.

It’s not just two-bit operators that charge high fees on seconds but some of the biggest firms in the sector – the award-winners, the event sponsors and the advertisers. However, it can be difficult to find out exactly how much some firms charge without submitting a case to them.

Mortgage Solutions reported last September that some firms were charging over £5,000 on a £120,000 second charge loan while other organisations declined to disclose their fees.

I wonder why?

 

Take action

Many networks are already revisiting their second charge distribution strategy, introducing direct-to-lender panels and a wider choice of distributors, giving their appointed representatives a choice about who they can deal with.

Of course, there are other things stopping seconds from surging – the failure of the major sourcing systems to adequately address seconds and the low remortgage rates currently on offer to name but two.

But blaming brokers for failing to embrace seconds isn’t OK. I know you’ve got your eyes wide open and still see the same lack of parity with first charge lending that I see.

Let’s be clear, be open about our fees and give brokers more credit. Offer a fair, transparent route to a second charge mortgage and they will take a second look.

There are 10 Comment(s)

10 responses to “Don’t blame brokers for not embracing seconds – TFC”

  1. Marc Rigg says:

    Thankfully somebody finally said it!! Yes you are right we are not comfortable with the excessive fees and second charge packagers and lenders offering us 50% of the rip off fees still doesn’t mean we will be comfortable with them. I have said this for years, when second charges are on parity with first charges then you will see some greater take up. Most Brokers care about our clients and rely on them for repeat business and we aren’t going to risk that relationship to suit the second charge brigade.

    • LankyDes says:

      Even if you get the fees right and I have some providers who have, only one in ten will ever be better on a second charge. I didn’t need the FCA to tell me to look at the second charge option; I always did so and the idea is risible that I could have permissions withdrawn for not doing them when I have the evidence that they are far more expensive.

    • Paul Mcgonigle says:

      and you shouldnt be Marc. I think the second charge market is waking up to this – its the key topic within the sector. That said my company charges on average 1.3% of our average loan to fund a case, including the costs of searches, AVMs, broker sales desks, field teams, compliance etc…the list go’s on. If you shop around you will find the right firm – there are a few of us that have been in the game for 10 years, know the process and treat your clients right. Charging a client a reasonable fee on completion for the work provided is not rocket science, and if the packaging efficiencies are there to support that model then it works. Many firms did not invest in their business, retained the profits and now can not simplify that fee. Retention of the client is key for you, as broker retention is key to my firm. Others could learn from that.

  2. John S says:

    I agree that traditionally high fees put brokers off considering seconds but the biggest problem for me is the lack of direct to broker lenders. This means in the main having to deal with packagers where poor service, lack of knowledge and misleading information prevail and if you couple this to the fact that most still want to communicate with my client directly and expect original client documents (passport, drivers licence etc) to be posted to them. I wouldn’t send original document myself but I am expected to ask clients to do so! Are we living in the dark ages?

    • Paul Mcgonigle says:

      John S – the request for orginal documentation stems from the lenders not the packagers/master brokers. The exception of course is when the broker themselves are advising and hold the original documents and send the certified copies – but that is only ok when the broker is/can advise. In todays world most master brokers offer both solutions. I find in my company it is seldom asked for – it is on the occasion that the lenders can not rely on their EIDV that one is requested. There are a lot of master brokers that have a lot of knowledge in this area – you just need to find the right one. And if i could just point out that in some instances in the DA space especially (but not all of course) the master broker has to fight with incorrect information on I and E, “inflated” valuations to meet criteria and poor understanding when it comes to returning documents requested. This is time consuming for a master broker, and a reason why lenders will put filters in place and rely on master brokers to take this pain away. It would be easier if the broker community as a whole understood the product niches and criteria better so that lenders would open up their doors, but i fear that in general the market is not in shape to do this. This is of course not aimed at you, its an observation – and you can gain access to some lenders via a few clubs. But beware, the lenders may offer products to the master brokers that you can not gain direct via some clubs. The benefit to you of course is that you have choices.

      • John S says:

        Paul, I stand by what I have said I have been searching for years for a decent master broker and there is just not one to be found. I had one recently where I asked the person dealing with my case if they could supply me a KFI as the chosen product wasn’t coming up in my sourcing – what is a KFI was the response. Another firm despite being told by email and having typed in bold writing on the initial enquiry DO NOT CONTACT THE CLIENT I AM GIVING THE ADVICE and guess what straight on the phone to the client. A third firm kept me on the phone for twenty minutes while I was trying to speak to an underwriter apparently, they thought I was a client and couldn’t find my case anywhere. I could write a book on the subject.

        I don’t accept your point about DA brokers as I left a network last year where they couldn’t spell secured loan so there is no way that business from any of their ARs would be better than mine. To be brutally honest if you are not getting the correct information back from brokers are you making it clear what exactly is required in the first place?

        I think you are too quick to look to blame brokers & lenders and there may well be issues with both but surely its up to you to resolve these issues if there is to be a place for packagers moving forward

        • Paul Mcgonigle says:

          It appears you have had a bad experience from packagers then John, but as i did not presume all DA brokers create a problem so you should presume that there are some good guys out there in the Packaging world. The 3 examples you give are shambolic and has formulated your opinion and i would laugh at this if it wasnt so shocking, that point is clearly taken by your experiences. Maybe they should invest in quality staff as i did ? You should name and shame the culprits.

          Your point about the AR vs DA point again wasnt personal towards you. You point out that that we may not be getting the correct information back from brokers by not making it clear in the first place? you should download the form – i wouldnt imagine a monthly I and E from my firm would be any different to a lender form which is completed daily by brokers. Clearly put, some brokers will bend the I and E and hope it go’s through, it clearly isnt that simple. Have you seen a council tax bill in London for £75 a month or a family of 6 shopping for £70 a week ? But the phrase said “some instances”, and i mentioned it was not all DA as well.

          And there was absolutely no blame in my comment to anyone at all. It was an observation of where the market is today, that lenders require help, Packagers do have a place in the market and that yes you are right, some Packagers are charging ridiculous fees. I do not put myself in that bracket.

          Packagers need to remain relevant to the market to survive, which you point out – and i agree. A simplistic proposition, better products for your clients, experience, education to the market in general through face to face representation and simplified process through technology enhancements are all key to offering that solution – and my company has invested in all of this.

  3. Robert Gill says:

    Rates & fees for second charge mortgages are higher than remortgages and further advances. Therefore they always have been and always will be, more often than not, a third choice option for mortgage brokers.

  4. Tony says:

    I have a very experienced second charge packager that does not charge any (up front or completion) fees whatsoever and offers whole of market access

  5. dougie says:

    Just being to a Shawbrook second charge event in Manchester and was surprised at the lack of knowledge of most brokers about how to use this type of borrowing and many did not even discuss this type of loan with clients but still call themselves independent. Many brokers can gain direct access to 5 second charge lenders through L&G with Shawbrook being added soon. Some master brokers now charge £195 upfront or £495 on completion so fees are not all inflated to 10% to 12% of the amount borrowed. Brokers need to search out a master broker partner they feel able to work with, gain some knowledge so they are comfortable to offer both direct access and package cases where needs be. Sourcing seconds with Mortgage Brian, Twenty7tec and Tri-gold must be on all client files when doing any further advances and debt consolidation to protect the broker and show you are offering whole of market advice.

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