The term 'mortgage packager' is one that personally I was glad to leave behind when the Credit Crunch of 2007 and 2008 hit....
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div>The term 'mortgage packager' is one that personally I was glad to leave behind when the Credit Crunch of 2007 and 2008 hit. Many 'packagers' were forced to close their doors, due to the lack of liquidity and collapse of both sub-prime and self-cert lending – both now deemed as ‘dirty’ words, best left forgotten and in the past.
Traditionally, mortgage packagers were responsible for placing those cases that did not fit conventional High Street routes and their role included sourcing ‘alternative’ funding from a panel of ‘non-conforming’ lenders, panel managing and instructing valuations, and collating the information required to underwrite and ultimately offer a case, on behalf of a lender. They were also an invaluable route to market for lenders with products to get out to market and a large part of a packagers role and ultimately value (for lenders anyway) was in the distribution they provided.
Many only dealt in ‘non-conforming’ mortgages and did not offer commercial, secured loans or bridging finance. Of course there were those that specialised in these areas, rather than focusing on mortgages – the so called secured loan ‘Master Brokers’ being an example.
Today, the market has changed. The Credit Crunch turned the mortgage and financial World on its head. Everything changed. Some say it was inevitable. With hindsight and looking back, something certainly had to happen and the landscape has changed for the better, despite claiming many casualties along the way.
So what does a ‘packager’ look like today, in our post Credit Crunch world? With MMR looming just a matter of days away – there are many factors shaping our market. Like survival of the fittest and evolution, despite the massive losses felt across the global markets over the past 5 or 6 years, I believe those still around in the specialist market today would agree that things ultimately have changed for the better.
For me, a business that has identified several specialist sectors with experts in each field is the future of the sector. If a deal is pigeon-holed in to single product area from outset, then it may not be best for the client. Ultimately, we offer specialist funding solutions for all types of secured lending, whether it be first or second charge, mortgage term lending or short term bridging finance, secured loans or commercial finance. To offer the best possible solution to a broker looking to obtain finance for their client, the specialist distributor, packager, master broker or whatever term you wish to use, must be able to consider and compare all of these as possible funding solutions.
At Brightstar, we operate a ‘buddy system’ where potential deals are shared between divisions, so that the best possible solution is offered to our brokers. More often than not, the deal starts with a phone-call from the broker, who may have already decided that it is a secured loan or a bridging loan that their client requires. We discuss the details of the case and actually come up with an alternative solution that differs from the initial route the broker had in mind. For example, a remortgage becomes a secured loan, or a mortgage becomes a bridging loan. It is flexibility and being able to adapt that is key, whilst ensuring at all times that the broker understands exactly why they are being offered an alternative. It never ceases to amaze me when I pick up the phone and the broker at the other end starts the call by saying “my client wants a bridging loan, can you help?” In reality, they may require a bridging loan, as their circumstances are best suited to this type of funding.
Rarely would a client ‘want’ to take bridging, given the increased rates and higher risks involved. However, sometimes it is required and is the right solution. The best example would be where a client wants to buy a property requiring modernisation and refurbishment, do it up and then sell it. Due to issues surrounding the inevitable retention that is guaranteed on this type of deal (if the broker had advised on a mortgage) and the short term nature of the funding requirement, bridging is the obvious answer here. Despite this, I can’t imagine any client saying, “I really want to take a bridging loan out.” It is a means to an end and a short term solution to their funding needs. It wins over a mortgage as the most suitable product.
As specialist distributors inevitably fall under scrutiny from the Regulator for the important role they play in the sourcing of suitable products, where the broker has sourced funding via a packager, so does the need to clearly identify the true nature of the deal and whether or not it falls under FCA regulations.
The regulation of all secured lending is happening and is already upon us, with the first major change just days away. However, the specialist sectors are in the main ahead of the game, largely due to the likes of the industry’s excellent trade bodies and code of conducts such as NACFB, AOBP, ASTL, AFB, and most recently the launch of EQUIS – all of whom work closely with the Regulator to ensure best practice across all sectors of the specialist finance arena. Collaboration is key. Change is upon us all, so embrace it. Do not fear it.
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