Together standing tall?
Those who said their days were numbered may have been proved wrong but the world of packaging has still undergone a radical overhaul in the last 18 months. Probably the most far-reaching change within this has been the factioning of packagers into different associations. The traditional ‘big two’ are still the Professional Mortgage Packagers Alliance (PMPA) and the Regulatory Alliance of Mortgage Packagers (RAMP) but there are now other associations in the market – most recently we have seen a number of firms split from PMPA to form the Association of Mortgage Packagers and Distributors (AMPD). The United Packagers Association (UPA) has also been formed, while smaller packagers have clubbed together under the Freehold banner.
For those joining an association, there seems to be a common theme. “People have joined together, very simply, to be able to purchase goods through the lender,” Jon O’Brian, operations director at PMPA says. “You just don’t have the purchasing power that you have with an association as an individual packager and you cannot match the services a large packager can provide, in terms of IT set-up, service and distribution.”
In terms of business, this seems to be a fairly sensible option as associations should be able to wield more influence in the market, especially when it comes to negotiating exclusive deals with lenders.
However, there are those that see a different side to the argument and are determined to maintain their individual status. Andrew Seymour, chairman of Optoma Broker Solutions, is one. He says: “The idea of joining an association sounds great in terms of having bigger resources and more support but you have to remember they are all businessmen first then members of the association second so they are never going to put the needs of the association first. If you have 30 packagers all looking out for themselves, then it is going to be much more difficult to get anything done.”
Obviously, when it comes to the subject of association membership, packagers are going to choose what is best for their business. If they think their needs are best served outside an association, that is the path they are going to take. However, in the long-term, is it possible for one packager to stay the course up against an association containing 30 packagers? Often, it depends on who you talk to.
“It is not true to say if you are in an association, you will retain a lender’s business,” David Wylie, managing director of c2-financial, says. “For us, in the last 18 months, we have experienced unprecedented growth in both turnover and profitability so there is no merit in us joining a packager association.”
However, concerns over the future role of lenders within the packaging market are looming menacingly. Recently, GMAC-RFC were rumoured to be cutting the number of packagers it works with. This streamlining could be at the expense of the smaller packagers not currently ‘housed’ within an association.
Payam Azadi, head of marketing at The Mortgage Times Group, has a different view though. He says: “At the minute there are too many packagers in the market and it will be the medium-sized firms that will disappear in my opinion. They can’t compete with the size of the big firms and don’t have face-to-face contact with their clients that smaller packagers enjoy. If they can’t compete, they will go.”
There are big challenges ahead for packagers regardless of size. As well as a possible cull in numbers by some lenders, increasing costs and distribution channel challenges pose further questions for the industry. It seems that not only are associations here to stay but their numbers may grow.
For John Rice, managing director of RAMP, consolidation will be the key word. He says: “I think there will be a certain amount of consolidation within the industry as everyone is still trying to band together to help stop themselves being left behind. What will be left will be around 20 large packagers and branded lenders and around 100 smaller packagers.”
But how will all this change effect mortgage brokers? The consensus among intermediaries is that it will have minimal impact. Jock Cassidy, managing director of Ashley Law, sums up the view: “From our point of view, there haven’t been many changes as the adviser still does most of the work. Packagers are always going to pick up the odd case from a broker, especially in the sub-prime market, but I think they have a shortened lifespan in the future as the greater availability of underwriting means you can avoid going through them.”
Packagers have a number of considerations to make whether they are already housed within an association or looking at the possibilities the ‘newbies’ are presenting. O’Brian explains: “There will be a very strong future for those that have already sorted their future out. If they have lost clients and not replaced them, they will wither and eventually die. If you can keep your clients and continue to offer a good service, you’ll be okay.”