There is no doubting the ongoing growth of the secured loan sector but this is still an area where many mortgage brokers are understandably just beginning to learn how easy and appropriate the use of secured loans can be. I thought I’d share my thoughts on what mortgage brokers should look for when selecting a partner for their second charge business and what you should consider to provide your clients with the best products and service.
Secured loan partners
Secured loan master brokers are – or at least should be – experts in providing a full service to enable you to offer your clients the option of a secured loan. Master brokers should operate in a similar way to you by offering a whole of market service, with a large number of secured loan lenders available. Using a master broker should release you from the burden of paperwork and the compliance processes in transacting a secured loan application. A complete service should enhance your time efficiency and quality of service your client receives.
How do you select a master broker as a partner to your business? Having been in the secured loan industry for 25 years and a master broker for over 18 years, I have experienced many broker operations who claimed to offer much and failed to deliver. This results in poor service, complaints and ultimately advisers losing clients.
Key areas
I believe that these are the key areas you should consider when selecting a master broker.
- A master broker should be independent and offer a whole of market proposition, with key relationships – known as agencies – with at least 15 main lenders. This ensures the best products are available to meet your clients’ circumstances, embracing ‘Treating Customers Fairly’ (TCF). Beware of brokers with limited panel options who will often farm out your client to another broker.
- Secured loan products vary and are complex, so the experience of the master broker’s staff is crucial. Don’t be afraid to ask the staff how long they have been in the industry. In my experience, it takes at least five years for a person to build their knowledge to an acceptable level to work at a master broker.
- Look for a broker that has structured their underwriters in ‘owning’ an individual case, rather than a conveyor belt system where both you and your client are passed from person to person in the office.
- Beware of brokers whose business model relies upon cross-selling payment protection insurance to your client.
- Look for a broker that is not going to use your clients’ details for their own future marketing activities. If your client approaches a master broker directly in future, then you should be advised and paid a renewal commission.
Once you have built a rapport with your master broker, you may want to submit other types of business, such as commercial mortgages or bridging loans, so consider the other areas that they can assist you with and don’t be afraid to ask for advice. Finally, remember, your client will see the master broker as an extension to your own business and how they operate will reflect on you. So choose wisely.
Considering secured loans
Second charge mortgages have been around for many years, but it is only due to recent legislative changes that confidence in offering these products is beginning to grow among mortgage intermediaries and advisers.
Secured loans differ from mortgages and are governed by the Consumer Credit Act, not the Financial Services Authority. This presents you – the broker – with a different set of compliance issues with which to operate. I know that brokers already have busy days and are dealing with a whole framework of complex legal requirements, just to offer their existing product portfolio. So it’s little wonder that many brokers are reluctant to consider the secured loan route.
However, TCF is here to stay, and quite rightly so. Much has been written recently about this subject to promote secured loans, but given the importance of upholding the principles of TCF, I make no apologies for highlighting a couple of the key consideration examples again. Firstly, suppose your client wants to raise capital by releasing equity in their property, but is tied into excessive settlement penalties against their existing mortgage.
Another crucial example is if your client has an existing deal with a prime mortgage lender, but their circumstances have changed, or they have experienced repayment difficulties, which could mean that a complete remortgage arrangement would steer them down the more expensive non-conforming route.
The module from Trigold recognises that most brokers are not always specialists in arranging secured loans. Trigold Secured Sourcing boasts a collection of experienced master brokers who are experts and will handle the whole application on your behalf.
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