AMI warns lenders against proc fee bias
The Association of Mortgage Intermediaries has warned lenders against using proc fees to “promote either provider or product bias” in case questions are raised over anti-competitiveness.
AMI director Robert Sinclair comments were prompted by reports that lenders are considering paying proc fees linked to quality.
This could include selectively rewarding different loan to value bands depending on the type of business lenders are looking to secure as well pricing the product for risk.
But he warned: "Lenders will not embark on this lightly. They will want to consider all the implications carefully and ensure they remain competitive in the market.
"They will also want to ensure they are not embarking on practices that could be seen as promoting either provider or product bias or provoke the interest of the Office of Fair Trading."
Sinclair claimed there is a risk that lenders could pay higher proc fees on some products which might unintentionally encourage a bias towards products that aren't necessarily the most appropriate for borrowers.
He said during discussions about linking proc fees to quality lenders "must be careful to avoid straying back into that place we have been studiously avoiding since the days of high sub-prime proc fees".
Sinclair explained that as funding remains scarce and capital and liquidity issues continue to be pushed up the agenda lenders are looking to ensure that they are able to secure the business that matches both their risk appetite and provide the balance of lending book that they want.
This could lead some to use quality measures to select those to whom they might offer better products or improved procuration fees.
He said intermediaries are happy to discuss these developments with lenders "in the spirit of the excellent relations that we have had for a number of years".
And he added: "This has been against the back-drop of a recognition of the value that intermediaries deliver in providing quality business that proceeds to completion.
"Lenders should not see this as an opportunity to cut the cost of procuration fees but to ensure that standards improve so reducing other overheads."
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