For lenders it is something that is part of the daily business of keeping a mortgage range open and flexible to changes in the market.
For brokers, however, it is a source of constant frustration as they seek to find the best mortgage options for their clients, but are left facing a brick wall.
What is it? Quite simply, an area that lenders have to deal with and brokers have to face – product withdrawal. Admittedly this is not particularly new to the industry, as lenders are forced to withdraw products at short notice for a variety of reasons.
But the past few months have seen lenders forced into withdrawing ranges at short notice, often to the frustration of brokers and packagers. Preferred, for example, was recently forced to withdraw its range with only 24 hours’ notice.
While lenders will act in the case of necessity, it does leave brokers not only with the problem of finding alternative sources for existing business, but looking for products that will fit the criteria of a client whose needs the pulled product filled.
Keeping brokers in the loop
One provider who has set out ways to ensure that brokers are kept in the loop when products are withdrawn is Complete Mortgage and Loan Services, which confirmed that it would be adding product withdrawals to its regular e-mail updates.
It admitted that lenders pulling products at short notice had become a problem, and that brokers needed to be informed of developments in the fastest and most efficient way possible.
Head of sales and marketing at Complete Mortgage and Loan Services, Tristan Pile, believes that this method would be beneficial to brokers as he described the means of supplying news about product withdrawals as ‘a case of ‘hit and miss’ so far’.
He explains: “Ultimately, this not only saves us time in processing applications, but it also helps our broker base to offer their mortgage clients accurate and timely information about what is on offer to them.”
Where does this leave the broker and packager though? The fact that products are withdrawn is enough cause for frustration with new options needing to be found, but what about those providers that take the time to prepare materials on certain products?
Dale Jannels, sales and marketing director at All Types of Mortgages, admits that this caused problems for the packager, and that it was something that could be better managed.
He says: “We find that lenders advertise to mortgage intermediaries the deadlines in order for us to keep up-to-date, and this allows us to update our websites, advertising and marketing materials.
"Once you get down the line, you find that the product has gone. It’s not the lender who suffers as a result of this, but I can see from their point of view that they have to make these decisions as the markets change.
“We try to get mortgage lenders to work with us and we appreciate that they will assign £50 million to a certain product and when that has run out, they will let us know.
"They tell us that some mortgage products and ranges are only available for a short period of time but for us it is useful to know, as it is a matter of when, not if.”
Preparing and planning ahead
While many people understand why lenders are forced into this action, others feel that mortgage providers could play more of a part in preparing and planning ahead for potential product pulls.
Daniel Gale, operations manager at Help Personal Finance, says: “The credit crunch has taken effect and loan books are deemed to be less profitable and therefore less desirable to potential buyers.
"Lenders who use securitisation need to make these books more attractive to the financial markets so are now more nervous about the risks that they are taking, especially when it comes to non-conforming customers.
“The credit crunch has led to the banks and lending institutions wanting to make the same amount of money without taking the same risks.
"This has meant tightening criteria, lowering loan-to-values, tighter rules regarding self-certification criteria and ultimately, mortgage products being pulled from the market. Even those balance sheet lenders are affected as the lack of financial products has led to them seeing a dramatic reduction in the number of redemptions that they receive.”
Gale further claims that recent changes have not strengthened the market and criticised lenders for their inability to inform intermediaries about product withdrawals.
He explains: “Over the last few months there have been more product changes than we’ve been used to in the market and not all have been delivered with reasonable notice. Informing mortgage intermediaries and customers that products are not available with no notice simply isn’t acceptable and certainly doesn’t seem to be treating the customer, or the broker, fairly.”
A softener to the blow
The fact that notice is given is sometimes seen as a ‘softener to the blow’. Gale admits that a recent product withdrawal by SPPL was not too harsh because ‘reasonable notice’ was given to brokers ‘to allow them to work the pipeline deals through to completion’.
However, he was not so complimentary about other lenders who he claimed had not shown the same level of commitment. He adds: “The lenders know how much business they are writing each day and they know how much money they have left, so surely they can give reasonable notice?
“In challenging times it’s important that the industry pulls together. Brokers support lenders with business and the lenders should reciprocate this by keeping us in the loop, rather than performing a damage limitation exercise by delivering the news at the last minute.
"It would be nice if the Financial Services Authority ensures that in future, lenders take a suitably prudent approach to liquidity and maintains a supply of cash to fund all of the deals that have been sold on their behalf. We all accept why the products are being pulled, but please just give us time to complete the deals we have already sold on the lender’s behalf.”
Andy Pratt, chief operating officer at Alexander Hall, admitted that being part of a collective of major brokers allows it to form direct relationships with lenders which allows access to underwriters, gives the opportunity to submit new business directly and also have named individuals to contact in the event of queries or escalation.
This arrangement allows the broker to develop strong relationships that allow them to be forewarned on new products, and be aware of when withdrawals are to be made.
Pratt says: “We will usually get the maximum notice from a lender in order to communicate with our brokers and get all applications submitted. There have been some high-profile product withdrawals over the past few weeks, with products being withdrawn immediately with no notice period or with less than a single working day.”
Where to lay the blame?
In regard to where to lay the blame, and in contrast to Gale’s earlier comments, Pratt has some sympathy for lenders and believes that they are not the sole purpose of liability in this instance.
“This is more to do with the state of the market at the moment because lenders are finding it difficult to price products at the right level to attract the business they want and also maintain service levels,” he says. “The reason for the rapid product withdrawals has been mostly driven by concerns over service.”
Despite not putting the blame solely at the feet of the lender, Pratt believes that there needs to be a culture change to ensure that intermediaries are informed of what is going on with products.
Pratt adds: “Lenders do need to look at their communication strategies because they have become lazy in some respects, in particular relying on online communication when brokers log onto their systems.
"This is not a guaranteed way of getting the message across and can leave brokers feeling disappointed. Important messages like product withdrawals, procuration fee changes and new product announcements need to be backed up with timely e-mails and supported by phone calls from business development managers.
“Lenders need to demonstrate more joined-up thinking on communication to brokers, especially lenders that also have a direct channel, and the only way to do this is to get a cohesive communication strategy between the product, press relations and sales functions in their business.”
A culture change is needed
With a contrast in opinions across the mortgage industry, there does seem to be the need to have a culture change in the way brokers are kept informed by lenders.
Whether this is in the method as described by Complete, or by other means as suggested by Pratt and Gale, it seems that problems can be avoided if brokers are simply informed in advance.
So what are the answers? For brokers to keep better links with lenders? For lenders to keep better links with brokers?
This is for brokers to resolve depending on their circumstances, but if a culture change can be made then this industry would be much less frustrated.
