Don’t turn your back

Effective distribution has always been one of the key challenges for the non-conforming mortgage market and over the last decade it has evolved significantly. For those looking to build on their success in this market and grow into the future, working with and developing an effective distribution network remains key.

Despite many of the challenges they have faced, and predictions of their demise from market commentators, the packaging industry remains central to the non-conforming market.

Indeed there is a compelling argument to suggest they have never been in a stronger position and will continue to grow their influence and importance in this market in the coming months and years. Certainly some of the larger packaging associations have substantially increased their volumes and in doing so have created the economies of scale that make their proposition a very valuable one indeed.

Not only is the volume of business producing benefits, but by working together with many different partners and member companies, the bigger associations have also been able to deliver significant benefits to the market through the IT systems they have put in place, while also improving the products on offer.

Creating hurdles

In the last few years the introduction of regulation has created a number of hurdles for the mortgage market and particularly the non-conforming sector. There were concerns that packagers sitting outside of the FSA’s remit would not last long in the new environment and this has simply not proved to be the case.

There is no doubt about the amount of effort that has gone into ensuring the large-scale changes introduced by regulation did not disrupt business in the long term and it is a credit to the mortgage market that it has been able to adapt to the new environment so well.

However against this general backdrop, there are a number of particular areas in which there has been real change for distribution in the non-conforming market. One of these is undoubtedly in the way that the market is perceived.


A decade ago, intermediaries and lenders operating in the non-conforming sector were at the very fringes of the UK mortgage market. There were certainly less firms involved and in some instance practices and procedures were not as tight as they could have been or as defined they are today.

In contrast the market is now considered as being a normal line of business for lenders right across the board and increasingly high-street brands are seeing non-conforming mortgages as an area they simply cannot afford to ignore.

Regulation has gone a long way to create a framework in which many of the past’s poor practices have been eradicated from the sector. However many of the improvements we have seen have also been driven by the rising levels of competition in the market.

In turn this has created a non-conforming sector which operates off leaner margins and provides better value for clients than it has ever done in the past.

In the coming 12 to 18 months, some of the biggest changes to the non-conforming market will come in the focus that lenders are now putting on their operations here. Rather than simply reacting to demand or working on compliance and regulation, there is a momentum in the market to design, install and run systems that meet non-conforming’s specialist needs.


Certainly there is no doubt the necessary level of IT is available to make processes and administrative systems a lot smoother and faster. Information needs to be shared and the operations being run by lenders, packagers and intermediaries need to be integrated. Each firm has spent a long time focusing on their own operations and how to make them work effectively. Now they must become less introvert and look carefully at how they can most effectively integrate with their corporate partners. Integration, rather than innovation is the challenge that faces this market over the coming years and those who get it right will quickly steal and march on competitors.

Most of the work in this area will focus on the ability to pass client information effectively from one partner to another without the need to re-key it.

It sounds very simple and has been something the industry has talked about for a number of years, but only now does it look like it could be a reality and begin to become the norm rather than the exception for many of the processes related to non-conforming mortgage applications.

For those looking more closely to the broker market, one of the big focuses will be on the improvements being delivered in sourcing technology. At the moment the non-conforming market is not served as well as it might be by the mainstream sourcing systems, although there have been some significant improvements. While these, in turn, may make it easier for brokers to find and source non-conforming products, it will never replace the knowledge and added service, which packagers bring to the table.

Indeed for lenders serious about the non-conforming market, to turn away from the packaging sector would seem to be a mistake at a time when they are offering more than they have ever done.

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