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p>The issue of lender fees has been a hotly-debated topic, mainly down to the large grey area of proc fees, which has made many question whether borrowers are in control of getting a fair deal at all.
On top of a long list of fees a borrower can typically face (arrangement fees, valuation fees, exit fees, ERC’s, etc…), the fees which get most people talking are the procuration kind. It has been long argued that lenders which offer higher proc fees are more likely to woo the brokers than others. With this in mind, this leaves rather muddy waters regarding whether its client is getting the best possible deal.
Terry Markham of Try Loans believes that in some cases lenders offering higher proc fees are getting larger volumes of business.
“…many larger distributors and packagers are negotiating deals with lenders for volume business, and in many circumstances, preventing brokers accessing certain deals if they do not use their services,” Terry said.
“However, I also believe that when brokers do use these distributors, the fees received from the lender are not being split equitably with the introducing broker.”
Terry also believes there is a lack of transparency, stating that borrowers are sometimes not shown clearly how much of a fee is being paid to the packager.
“There is evidence which demonstrates that borrowers are told of the amount of lender’s facility fee and broker fee [is] being charged, however, it is not transparent as to how much of the fees is being paid to the distributor/packager, by the lender from the facility fee,” he added.
Mo Chishti, Managing Director of TMM, feels there isn’t a lack of transparency regarding fees.
“As many Directly Regulated brokers are returned to Networks, Networks are setting standards for disclosure that are actually checked,” he said.
Mo also commented that there are still those who go after commission, however doesn’t absolutely believe that lenders with the highest proc fees are getting the most business.
“[As] the FCA tightens the noose all the time, this should not be key to placing business and let’s hope those that do place for larger proc fees are sifted out of the market,” he added.
Mo did agree that fees can muddy the water on broker advice on some occasions, such as commercial deals, where mortgage desks may be easier to use than spending time on cases to get what’s best for the client.
“[Clients] should be getting what’s best for them, long term,” Mo concluded.
From the perspective of Ashley Ilsen of Regentsmead it’s not about the lender with the highest proc fee, it’s all down to where the broker’s priority lies.
He added that there is an awareness of some lenders charging unjustified fees.
“We have heard of instances of lenders charging upfront fees even before they have agreed to lend for services, such as the lender coming to meet you on site to have a look around,” he said.
“Whilst we are lenders, we are not surveyors, so I don’t see how a charge for this can be justified.
“At Regentsmead we believe the client should only need to part with their cash and pay a ‘commitment fee’ once the lender is ready to commit to the project.”
Steve Walker of Promise Solutions said that in the second charge sector, brokers should always aim to demonstrably get the right product for the borrower, irrespective of whether the sale is advised or non-advised.
Concluding the debate, Steve said: “Any broker or lender which attempts to override the best outcomes in favour of commissions or incentives deserves closer scrutiny by the regulator and will have difficulty in robustly defending any resultant miss-selling claim through FOS.”
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Who's in control?.
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