In a survey exclusively for Mortgage Solutions aimed at directly authorised (DA) mortgage brokers the results showed that 37% of respondents were willing to place a second charge mortgage application directly with the lender, rather than through a second charge master broker.
The current distribution model for secured loans sees the main flow of business channelled through a handful of master brokers with direct access to the lender not available. Given the evident desire of DAs to continue doing business in a way which comes naturally to them, regardless of whether the application for finance relates to a first or second charge loan, we’ve asked our panel of experts what their model of distribution will look like post-MCD.
Alan Cleary, managing director of Precise Mortgages, looks at the processes DAs must put in place to deal directly with second charge lenders.
David Copland, director of TMA, discusses the mortgage club’s future plans to deal with demand from DAs to go direct.
Martin Wilson, managing director of The Right Mortgage and Protection Network, discusses the network’s pre and post-MCD plans.
Alan Cleary is managing director of Precise Mortgages
On 21 March 2016, the regulation of second charge lending will transfer to the Financial Conduct Authority’s mortgage regime under the Mortgage Conduct of Business rule book (MCOB). Both lenders and brokers operating in the market will find it a fundamental shift as ostensibly the processes for second charge lending align with that of first charges.
I am not surprised that many brokers have said they would prefer to operate directly with mortgage lenders on second charges especially if that is the way they currently operate, however, I believe it will take time for this to occur on any meaningful scale.
Firstly, mortgage networks and principles of DA firms will need to decide whether they want to be involved in the second charge market and in what capacity and secondly they will need time to build and test MCoB compliant sales processes. I think both of these factors will delay any fundamental shift in distribution especially in the short term. What is important is that we as an industry work together to give customers as much choice as possible whether that be choice of product, lender or intermediary. That way there will be a strong chance that the second charge market will enjoy a sustained period of growth and customers get great second charge products.
David Copland is director of mortgage club TMA
Our plan is to appoint a panel of master brokers for directly authorised brokers to use. At the moment it is very difficult for any mortgage adviser to go direct to the lender as the different processes and ways of conducting second charge business means that it is all controlled by master brokers. As a result, I don’t think many advisers will want to advise directly on second charges on day one of the MCD.
TMA has therefore gone through extensive due diligence with its chosen master brokers.
We will continue to watch the market, however, and if more advisers want to advise clients and go direct to lender, we will also launch a direct-to-lender second charge panel. TMA and the LSL group already have strong relationships with a number of the second charge lenders as many do other products such as buy-to-let and short-term loans.
At this point we will also work with our lender partners to make sure that every mortgage adviser that uses TMA has access to the appropriate training to competently advise on both first and second charge loans when they choose to do so.
We are already one step along this process as TMA is embarking on a new initiative with Shawbrook this autumn to explain the benefits of second charge lending. It aims to provide advisers with the knowledge and information to decide whether or not they want to include second charges in their scope of service.
Martin Wilson is managing director of The Right Mortgage and Protection Network
Our plans are to give our advisers a choice while creating solutions that meet the evolving mortgage market landscape. If lenders provide an option to submit second charge business directly post-MCD, or even before, then we will ensure that our advisers are prepared for that.
Of course, we realise there will always be a place for master brokers. Their specialist knowledge can’t be overlooked and not every adviser, as proven by the survey results, will be wanting to advise on these products initially.
Remortgaging or a further advance is not always in the client’s best interest and consequently it’s essential that all options are considered. Therefore, in the initial period post-MCD, both advised and referral routes would be our preferred strategy.
Pre-MCD there are two aspects that we will be focusing on. Firstly how we support the training and education of these products to our members and secondly how we can support our technology providers to find solutions to source seconds, alongside first charge mortgages.
