When relationships break down – and why
Gary Salter is head of corporate accounts at Nationwide Group Intermediary Sales
Much has been written in recent weeks about lenders terminating relationships with brokers but very little has been heard from a lender’s perspective. Personally, I am not a fan of the use of the word ‘termination’, because it sounds rather abrupt. It doesn’t reflect the fact that a lender will never reach the point of needing the word until every avenue to improve the situation has been explored. But there is no doubt sometimes such conclusions of a lender-broker relationship are unavoidable.
In the absence of an industry-wide broker database, each lender must have its own processes to monitor which brokers they deal with. In its simplest form, this could mean simply checking the FCA database to ensure the broker is authorised – or, crucially, whether they have been de-authorised.
This, of course, offers no clue to the quality of the broker’s business or whether the broker is likely to commit mortgage fraud. This is where lenders must implement their own monitoring systems. We believe that more than 99% of brokers are never likely to come into conflict with a lender or need to worry about being removed from their panel
In any process to monitor broker quality there will always be a disparity of resources between lenders and, given the likely costs, it therefore follows that the effectiveness of controls will differ too.
To understand how fair the process is, it needs to be understood why a lender may remove a broker from their panel. At Nationwide, there are three primary reasons why we would terminate a relationship with a broker. The first and most likely is in connection with a confirmed fraud and, as would be expected, we closely monitor questionable activity to make sure it is detected. Unless there is clear evidence of fraudulent activity, we would usually monitor the broker’s business where we have suspicions. Sometimes, it can be the customer who is committing fraud and the broker may be unwittingly involved. The key question we ask is whether the broker could or should have known about it, with the key solution that the broker will be the one to know their customer and their business source.
The second reason for removal from a lender’s panel is around business quality. Each lender has its own metrics so there is likely to be a difference of views on what that entails, and therefore it doesn’t always follow that removal from one lender’s panel is likely to be followed by other removals. At Nationwide, if a broker fails our quality metrics, we take a consultative approach and aim to work with the firm to improve quality. This consists of regular meetings to discuss our concerns, remedial support around understanding our processes and policies, together with any additional training required for individuals. In the majority of cases, we have managed to work closely with firms to improve performance, so that removal is avoidable.
The final reason for panel removal is where a broker is abusive to our staff. Fortunately, this is extremely uncommon. This issue can be a result of frustration with a lender’s policy or processes and sometimes emotions boil over when things don’t go well, so we will take this into account. Often an apology is sufficient, although in extreme cases or persistent abuse we may take the decision to terminate.
This brings me onto our appeals process, which requires the broker to provide supporting evidence. This is designed to minimise spurious appeals, where the broker simply didn’t like our decision to terminate. The process involves a number of our business areas considering the broker’s appeal and, in the interests of fairness, we have strict timescales controlling the process.
Before we terminate any relationship, we carefully consider the facts as we understand the implications to the broker can be significant. Only when all other viable routes have been explored would termination be the end of the road.