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Do you expect to see less or more second charge mortgage lenders in 2018?

The great debate: Intermediaries rate second charge packagers

The great debate: Intermediaries rate second charge packagers

Intermediaries have praised the expertise and ease of process from packagers and master brokers, despite the ongoing argument that higher fees have purportedly been putting brokers off.

Since the implementation of the Mortgage Credit Directive (MCD), a broker must consider second charge products alongside first charges. 

As a result first charge brokers who consider themselves ‘whole-of-the-market’ are now turning to packagers as they need their specialist expertise in the second charge market. 

However, with lenders launching direct to broker offerings, the market has begun to question the need to use a second charge packager or master broker.

As a result, Loan Talk has spoken to brokers to find out their personal experiences of going through a second charge packager and whether it helped or hindered the process.  

Experiences of using packagers varied “greatly”

Sebastian Riemann is a mortgage broker at Libra Financial Planning, he has vast experience in the mortgage market, but since MCD’s implementation, he has relied on packagers to help provide second charge knowledge. 

“The lending criteria is very different to the first charge market, so there are lots of scenarios where clients can obtain funding on a second charge basis, but not necessarily on a conventional mortgage application. 

“Again this has only come to light by working closely with packagers.

“The packagers we have dealt with have, however, come in all different shapes and sizes and the experiences have varied greatly.”

Sebastian was pleased with his experience with one packager and described the process as very smooth with communication being excellent throughout. 

“All of this brought the experience of second charge lending in line with the first charge mortgages that we are used to from the work we undertake ourselves. 

“Something that wouldn’t be possible without the expertise of a good packager.”

An introducer for Brightstar Finance, mortgage director Sarah Hume, also described her experience with the packager as a positive one. 

“They made the whole process very easy, with a referral by email where they took over the whole process and communicated with my client directly. 

“My client had been to many high street banks who could not lend on the basis my client needed, and it was very satisfying that I put them in touch with someone who could help. 

“The commission rates are very good as well, considering I had very little involvement.”

Higher fees are putting brokers off

Jeremy Duncombe is a director at Legal & General Mortgage Club, which aims to provide brokers with choice and education on whether or not to use a packager or go direct to lenders.

He found that although brokers were having to consider second charge options, there were elements which were putting them off.

“At the moment, the higher fees associated with second charges and the different pricing model compared to firsts are putting off a large number of brokers as the gap between the costs of first and second charge loans has become evident. 

“For seconds to have any hope of reaching the same level of popularity as firsts, the industry will need to address this growing concern. 

“One key reason for this price discrepancy is the fee that master brokers charge in order to deliver the high level of satisfaction and service to the customer.”

Despite his positive experiences with packagers, Sebastian also endured problems with fees at one firm.

“Previously we had come across larger outfits where there was a very corporate feel, fees were hugely inflated and introduced late in the process and the ownership of cases was simply non-existent. 

“With the increased competition and regulation within the second charge market this does seem to be a thing of the past, as transparency to both the brokers and clients are now required and are at the forefront of people’s minds.”

Jeremy, however, did feel this problem was beginning to be addressed in the market. 

“Since MCD, master brokers are already starting to reduce their fees and thus bring them more in-line with first charge models. 

“The result is more affordable and better value products, which will benefit consumers and brokers in the long run.

“This will enable a more representative market to appear, making it much easier for brokers to compare first and second charges.”

“We no longer appear to be living in a vanilla world” 

Martin Stewart, director of London Money, has worked in financial services for the past 22 years and feels sometimes a packager wasn’t required.

“Let’s be honest, if a deal looks, smells and tastes vanilla the argument would be that a packager may well be a hindrance as opposed to an asset.

“However, we no longer appear to be living in a vanilla world and some of the cases we see coming through, the brokers would really struggle to know how to place, package and process them.”

Martin felt that for now the second charge market was very much a specialist area and if a broker was looking to operate in it, then they needed to be aware of not only the nuances of all lender criteria, but also the culture of this type of lending. 

“If you want to call yourself an independent mortgage broker, you have to have second charge mortgages [within] your scope of services.

“Currently not all lenders offer a direct service to the mortgage intermediary. 

“I don’t think many will be rushing to do so given [how much it will stretch resources]. 

“Some borrowers won’t give a broker a second chance, so really the broker needs to be very confident that what they are doing is going to lead to a positive result.”

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