HomeLoan Partnership Newsletter : Issue 12 - December 2011AR Status Enquiry Form

Welcome to the newsletter from HomeLoan Partnership, designed to keep you up to date with topical market news, sales ideas for your business and developments in the HomeLoan Partnership proposition. Make sure you add our email address to your safe senders list and if you decide you don't need the information or ideas there is an unsubscribe link at the footer of the article.

Snapshot of the market - keep in touch!

At the start of the year you would probably recall a slightly more positive outlook on the economy, albeit with fears of the effect of the austerity measures announced the previous autumn.

The year was a little lacklustre to say the least in terms of lending with the CML members struggling to meet their own targets of £135 billion. Now it seems that the forecast for 2012 has been revised to around the same figure but with a warning that there could in fact be a further slump in lending during the year.

In spite of this the BTL sector fared well with lending significantly up and criteria easing throughout the year and finally with Abbey dipping their toe in the water, looking to pick up a little of the lower risk, private investor action in 2012.

HomeLoan Partnership ended the year with an increase in sales of around 20%, reflecting the improvement in turnover for member firms and reflecting the support and wide proposition that we provide. Working so closely with members has been reflected in the independent feedback on the Cherry website where HomeLoan are now the top rated network!

The stock markets started a rollercoaster ride in August on the back of fears of default from the Greek economy. Investors must either be on the edge of their seats every day or more likely have their head in the sand hoping that things will be alright.

FTSE

The issues with Greece proved to be the tip of the proverbial iceberg with several other EU members being named and shamed and the whole debacle ended with a degree of separation from Cameron after what will probably be remembered as his 'Non' speech.

If you have clients worried about how this rollercoaster might affect their pension funds or investments, why not refer these for a no obligation review? At HomeLoan Partnership we provide members with access to a specialist IFA practice but you may have a local IFA with whom you can develop reciprocation.

According to the LV= Little Book of Protection, 1,392 people are made redundant every day, and every 4 minutes someone is declared insolvent or bankrupt. Employment and support allowance is £96.85 per week - so do your clients have adequate income protection? This booklet will make a great sales aid if used to help your prospects think realistically regarding their needs.

Inflation ended the year a fraction below the 5% threshold and is expected to fall during 2012.

Better news for landlords this year

YouGov figures show the average time to let an empty property has fallen to 13.3 days and the type of rental property is also changing, three bedrooms or more now accounting for 41% of properties rented, up from 32% just a year ago.

The Centre of Economic and Business Research forecast that by 2015 house prices could rise by 14% and average rents could reach an all-time high of £705 per month.

Government figures show that since the year 2000, the number of tenanted properties has risen from 1.8m to 3.9m and now 1 in every 6 properties (17.4%) is tenanted - the UK could be turning into a nation of landlords as well as homeowners! Latest CML figures show that BTL mortgage lending increased by 21% in Q2 with 65% of this lending as a result of re-mortgaging. These growth figures point to the areas of opportunity in the core product areas.

HomeLoan Partnership seems to match the trend in the growth of Buy-to-Let lending with our latest sales figures showing 80% year on year increases in this category. As a result we have released training events specifically aimed at this market.

Concerns over fraud lead to lender panel removals

Be aware! In the backdrop of difficulty qualifying for mortgages, UK Fraud Agency CIFAS confirms that vigilance is still needed as borrowers attempt to manipulate criteria. 24% of mortgage fraud is accounted for by borrowers attempting to hide adverse credit at an undisclosed address followed by false proof of income (24%), false employment details (20%) and altered documents at 10%.

Add to that the growing recognition that solicitors and surveyors can be involved in mortgage fraud and this makes lenders very defensive and determined to use technology to combat fraud. In a market where a lender can pick and choose who they lend money to and through which intermediaries, there has been the tendency to remove an intermediary from panel (often unfairly in our opinion) if there is the slightest suspicion of poor controls or complicity in fraud.

Although some of these panel removals appear to be very heavy handed, before we get too indignant about this we have to accept there are still brokers determined to manipulate schemes or overlook details on an application.

The FSA recently banned a broker and fined him £106,000 for knowingly submitting false applications. In June the FSA commenced a thematic review over mortgage fraud and are themselves conducting compulsory workshops around the country.

So what are lenders expectations and how do they track down fraudulent activity?

As you can imagine, given the cost of mortgage fraud lenders have developed sophisticated software to spot patterns & trends within their lending profile. Very obvious indicators might include…

  • The ratio of DIPs to submitted cases - is the broker simply using the lender to test criteria?
  • The ratio of cases withdrawn after application - especially when further information is requested.
  • Whether the applicants details match any other application they may have made within the consolidated group (LBG for example)
  • Whether the same solicitor or surveyor is used repeatedly - especially where these may have been removed from panel or are on a “watch” list

One lender confided that their software was clever enough to recognise the mobile phone number provided by an applicant and match that against every other record in their database.

In addition to these indicators there is an expectation that the broker will conduct fair assessment of documents provided by the applicant and a “sense test” on the details. For example, if the applicant is a waiter earning 50k per annum it might bear further corroboration!

Good systems & controls within a broker's office and an understanding of what lenders are looking for can keep a broker on side, and on panel.

HomeLoan Partnership provides member firms with a guide to fighting financial crime and regular guidance and updates along with electronic identity checking and a suspicious activity reporting facility.

Big Brother is watching you…

BSA

A new scheme has just been launched to improve collaboration between the CML, the BSA and the Inland Revenue to check whether mortgage applicants have declared income in line with the records held by the tax office.

In instances where the lender cannot verify an applicant's income sufficiently, they will refer the case, via a secure electronic platform, to the Inland Revenue who will provide verification (or otherwise!) for a small fee.

You can imagine that the Inland Revenue are just as interested in seeing what the applicant declares as income as the lender is in verifying this for the mortgage!

Countdown to the RDR - consider your options

Investment regulated brokers have now started their final countdown to the RDR. Now less than one year until its implementation date of 1st January 2013, this will undoubtedly affect broker's income from investments and many are starting to review whether the extra qualifications and obligations are worthwhile.

Income from protection sales is likely to be more important when covering the business costs and it is likely that the proportion of sales will change in favour of protection.

It also means a reduction in income for networks focussed on investment sales and these have been progressively increasing their fees in readiness for this. It might be time to look at a proposition not dependent upon investments - like ours!.

Directly Authorised brokers that already achieve a fair proportion of their income from protection and mortgages may well decide their investments can be referred to an authorised colleague whilst they remain in a more simple and profitable environment benefitting from proportionate regulation and lower charges.

If you have doubts about whether an RDR world is the right one for you & your company then our wide proposition may provide the option you are looking for. Why not visit our website?

Sales Ideas to improve your sales (performance)

Focus on Equity Release!

Few mortgage brokers extend their permissions to cover the sale of equity release products, probably because they feel the additional qualifications and knowledge needed can only be justified if they're able to find regular prospects for the business.

Even without this licence or authorisation, a simple referral relationship can enable you to prospect for this business and start you on a road to becoming more involved and selling it yourself.

So where do prospects exist?

The office for national statistics have recently confirmed that the number of people aged over 60 in the UK has increased to a staggering 13,262,256. You might want to prospect in Chichester, West Sussex, which has the highest number of pensioners in the UK, at 32% of the local population!

To find people eligible for equity release you might look for geographical retirement areas, social clubs, employers with retirement programmes and retail outlets focussed on this market. You should also remember your average mortgage client is likely to be aged 35-45 and all of them have parents that will fall into the target age bracket. Start the process by simply telling all of your clients and prospects that the product exists and asking if you can pass on the information.

Research by Aviva has confirmed the average price of a home belonging to the over 55s is £231,306, substantially higher than the overall house price average and therefore offering plenty of potential for equity release. They also commented that whilst 63% of those surveyed felt that openly discussing inheritance with parents was a taboo subject, 76% were all in favour of their parents using their main asset to fund retirement.

What is Equity Release commonly used for?

All kinds of things, but top of the list would be the following - click the links to see some more background information & research…

It seems pension planning in the UK will be difficult for the foreseeable future and people are going to have to work longer or retire on less income. So, releasing value from such a huge asset seems set to become the established way of dealing with this.

HomeLoan have established a relationship with leading Equity Release brokerage Responsible Life, where you will receive 70% of the procuration fee from the first 3 cases submitted - a great way to decide whether this might lead to your own equity release licence!

Update on the HomeLoan Partnership Proposition

Over the last 8 weeks HomeLoan has been training advisers on our new point of sale software, designed to streamline the sales process and reduce data entry wherever possible. This also allows advisers to communicate with clients by email, mail, sms and even record client conversations directly to the system if they so choose.

HomeLoan recently released new ancillary providers to the panel. The MoneyPlus group is one of the best established debt management companies in the UK and will provide a service to clients with financial difficulty and a referral fee to brokers. Borro.com is an innovative new short term loan provider allowing a prospect to raise funds against just about any tangible asset. Also added to the panel are Engage Mutual Assurance and Shepherds Friendly, specifically at the request of members to open up access to over 50's life cover with no underwriting requirements.

Our Business Development Forums took place in late November, supported by over 20 providers. These are sales focussed events for member firms at various locations where we can also invite those considering joining us to attend and get a feeling for us as a network. Ask for a place at an event.