EXPLAINED: The relationship between lenders and intermediaries

How lenders and intermediaries rely on each other

 

Responsible lending

 

When it comes to responsible lending, lenders often rely on a mortgage broker to accurately detail the financials, income and expenses of each client. While the lender is the one responsible, an intermediary will often help a client get documents in order that prove they can afford a mortgage. The lender must have trust that the intermediary has reported financials accurately so that there are no problems during underwriting. 

 

Distribution and disclosure

 

Lenders rely on intermediaries to advise their clients of the products available on the market and match them with a product that suits their needs. In fact, the FSA had considered making advice mandatory except under certain circumstances. Advice is almost always needed and a broker can help guide customers to lenders that are likely to approve a mortgage application for them.

 

The gap between the most digital of lenders and the least digital of lenders is huge. Mortgage brokers help to keep the long tail end of the market alive and therefore enable competition as well as help to resist a monopoly. 

 

Customer retention

 

Lenders rely on the retained customers of mortgage brokers to continue business in many cases.  Most lenders hope that the intermediary will guide their retained customer to a better mortgage product supplied by lenders that the intermediary does business with when the customer’s deal ends. 

 

For lenders who do not proactively contact customers at the end of a deal, the intermediary is valuable in advising the customer about how to obtain the best mortgage product for them. This is especially true if the intermediary can advise the customer on products available from their current lender. 

 

Product transfers

 

Product transfers are very similar to customer retention. However, the same issue of who owns the relationship with the client is still there. Some lenders have begun paying fees to intermediaries in order to procure the client when the broker advises a client to switch products with the same lender as opposed to remortgaging. Some brokers report that they hope to see this practice more widely adopted as it is one way to nurture the intermediary/lender relationship. 

 

Complex mortgage situations

 

Complex mortgage situations are one area where brokers are extremely useful to not only clients but lenders as well. When a customer has complex circumstances, such as being self-employed or having bad credit, they can benefit greatly from the help of a broker. These types of customers rely on brokers to help them find lenders that will approve their application. 

 

Lenders also rely on the broker to help bring them clients that may otherwise give up on getting a mortgage due to confusion with the application process when they have complex needs. 

Brokers rely on certain lenders to approve mortgage applications that deal with complex situations as well. Understanding which lenders are likely to approve a complex mortgage is of great help to brokers as it helps them better serve their customers and get them a mortgage. This is one part of the market that simply would not function well without the help of a broker. 

 

The bottom line

 

When it comes down to it, the relationship between lenders and brokers is one that is vital to the overall health of the mortgage industry. Brokers are needed to help fill the gap in digital lending and allow certain areas of the market to function. Both lenders and intermediaries rely on each other and work towards the end goal of getting their customer a mortgage that fits their needs.