As we hope to see a return to some sort of normality in the coming months, it is probably as good a time as any to reassess how the lending industry has coped with the pandemic and subsequent lockdowns. The sector has been remarkably resourceful and after the initial shock has been able to provide a full service to customers. Naturally, the Stamp Duty holiday played a part in ensuring a strong demand side, but the success of maintaining, in most parts, a robust supply side, should not be undervalued.
What about the packaging/distributor sector? How relevant is it to today’s lenders?
This symbiotic relationship between lenders and packagers in the specialist lending sector, which loosely includes bridging, second charge lending, off prime first charge and buy-to-let is likely to strengthen post Covid. For new lenders coming into the market, access to distribution (intermediaries) and not having to build a large servicing facility from outset has meant that packagers who take on much of the broker facing work, provide lenders with the outlet they need to develop their brand and proposition at minimum cost.
Looking beyond the lender/packager relationship what does access to a conduit like a packager provide for post Covid intermediaries?
The rise of specialist lending has been driven by demand for alternative funding solutions not provided by mainstream lenders. Part of that need stems from the number of people with less than perfect credit records, non-traditional income sources, self-employment and non-standard property problems, among others. Covid has exacerbated the issues of unemployment, self-employment failure leading to mortgage and rent arrears, as well as defaults on credit contracts.
It stands to reason that more brokers than ever are going to be searching for solutions outside the mainstream. Therefore, what better place to seek out help than packagers with lender relationships already established.
At Smart Money, we have seen the growing need for advisers with enquiries on second charge and buy-to-let clients to fully understand the changes that have taken place in the sector in the past two years. Using a packager, ensures that clients get the best possible advice on anything from the most appropriate second charge solution to buy-to-let Limited Company structures and tax implications to help them take advantage of the financing options available to invest in HMOs and MUFBs, for example.
With many brokers worried that they do not have the time or experience to fully consider sectors like second charge and buy-to-let, using a packager can allow them to access a range of products or lending options in one place. All of this helps brokers to provide a real service and provide customers with the most favourable solutions.
A good packager will filter the growing choice of products on the market, helping brokers to isolate those options which are most relevant to their clients. In addition, expert knowledge of the ways in which specialist lenders operate and the criteria which they will or will not accept, means that good packagers can improve referral or conversion rates in a fraction of the time that brokers would usually expend on such cases. Lastly, packagers like Smart Money can help to advise brokers to prepare supporting documentation needed to facilitate a smoother, quicker underwriting process.
Covid has had some positive effects on the market. Increasing innovation in the application of technology mean that packagers are more closely linked for immediate DIPs for example, the growing use of electronic signatures and the ability to be in contact with clients, lender and introducing brokers 24/7.
Choosing a packager though depends on doing some research.
- Look for the ones who can demonstrate high conversion rates and the ability to choose the right lender first time
- Good packagers have a wide lender panel
- Covid has made sure that the best packagers have not lost a step by having their team working from home both now and for any other unforeseen future event
- Does your packager work with lenders which accept scanned legal documents to avoid post delays and need to go to the post office?
- The same goes for the acceptance of desktop valuations by lenders
In a post-Covid market, the flexibility provided by being able to access the widest choice of lending options as a broker in the growing specialist lending market continues to make the strongest case for the value they bring. For lenders they represent the most cost effective route to market.