MYI: Based on the events of 2008 the Blemain Group of companies seems to be weathering the current climate very well. What makes you different from other specialist lenders?
GB: There are several things that set Blemain Group apart and that have enabled us to continue writing new business when so many of our competitors have withdrawn from the market. It’s true that we’ve sometimes had to adjust our plans at short notice to react to the marketplace, but we have only changed our core lending criteria twice since 2007 and we continue to concentrate on maximising volumes by lending prudently. We still have ample funds to lend and are eager for quality business.
Our unique business model has been an important factor in our resilience. We are still 70% privately owned and have several hundreds of millions of pounds reinvested in the business. As our brokers are aware, we cater for an incredibly broad spectrum of lending requirements. Lancashire Mortgage Corporation does commercial 1st and 2nd charge business, either term or bridging finance, as well as land finance, development finance and portfolio funding.
Blemain Finance lends on semi-commercial 1st charges, buy to let and residential 2nd charges for term and bridging finance; Cheshire Mortgage Corporation does regulated 1st charges and also covers several niches such as shared ownership and right-to-buy. This diverse product range spreads risk and allows us to control volumes more appropriately within the various market sectors. It also assists our liquidity as the different products have a wide range of redemption balances, some in the millions, the funds of which can be reinvested in the market.
With our unrestrictive criteria and broad coverage of property types we have products for almost any circumstances, allowing our brokers to take advantage of more opportunities. We really are the complete lending solution for the intermediary sector and there is great strength in this level of diversity.
Another thing that has helped us to continue through the tough conditions in 2008 is the fact that we secured a substantial securitisation and funding deal at the end of 2007. I think we were probably the first lender to complete a securitisation during the ‘credit crunch’ and this obviously gave us a distinct advantage. I’m still immensely proud that we accomplished this and it is a testament to the strength of the business that we secured our backing despite the conditions in the broader market.
MYI: How will the Competition Commission’s proposed PPI point-of-sale ban affect brokers and lenders? How is Blemain Group reacting to the ban?
GB: The point-of-sale ban on PPI is going to have a big impact on brokers. Unfortunately this is likely to take the form of a significant dent in their incomes. Those who diversify to offer a broad range of protection products may be able to offset some of their losses, but I think a decrease in commission revenues from loan PPI and MPPI is probably inevitable for everyone, although I should point out that Blemain Group has never based our profit models on PPI income as risk has always been paramount.
Nevertheless, in the current market having a revenue stream cut is the last thing that intermediaries need and they should look at alternatives immediately. We must also hope that overall performance in the mortgage sector has begun to pick up by the time the ban comes into force in 2010.
Without getting into a discussion around the appropriateness of the Competition Commission’s approach and findings, I can say that from a lender’s perspective one of our main concerns arising from the ban is the possibility of consumers being left entirely unprotected. Again, the current climate makes this more of an issue, as rising levels of unemployment mean that the risk of borrowers suddenly finding themselves without sufficient income to cover loan payments is also increased.
Blemain Group will respond quickly and withdraw PPI in the very near future. We are currently investigating alternative ways of helping our borrowers to ensure that they have protection in place should the worst happen. One option that is looking attractive is the possibility of incorporating a “payment waiver” feature as part of our product line. Initially, we would expect this to cover life, accident, sickness and unemployment. We have a lot of work to do before we can decide whether this kind of feature is suitable for the market, but it is very much under consideration.
MYI: What kind of services are you providing for introducers to help them build their business and maximise opportunities during the coming year?
GB: One of the things we are planning to develop in 2009 is the assistance we offer to our intermediaries for their marketing activities. We are already working much more closely with key networks and packagers on the production of joint marketing material, and this is something that we look forward to expanding on during the coming year.
Perhaps of greater interest to your readers is our new initiative for helping key brokers to leverage more business from their existing contacts. Many brokers have a large database of clients, but they lack the resources and investment to market it with the precision that is required to produce the best results. By putting our own extensive resources at their disposal we can market the database on their behalf, and also provide full sales, processing and packaging services for them.
The impetus for this initiative came from some conversations I had with the representatives of various brokerages at the London MBE last year. We discussed how we could help each other to boost volumes in the face of the current conditions and this was one of options we came up with. The initial indications are that this approach works well for both parties, and it is likely that we will look at making it more widely available during 2009.
MYI: The CML are predicting another tough year in 2009. What can brokers do to bolster their revenues and ride out the recession?
GB: Diversification has become the buzzword in the intermediary sector over the past few months and rightly so. I think that broadening their range of products and services is going to be absolutely fundamental for all brokers, regardless of the size of their business. Many are already looking at general insurance and debt management services, and anything that increases opportunities for lead conversion is worthy of consideration, especially any lending areas that are not already covered such as bridging finance or secured loans.
This kind of strategy should help brokers to counter any further deterioration in their revenues and put them in a stronger position for when the markets begin to recover, but they also need to be prudent about cutting their cloth to size; remodelling processes to improve efficiencies, and reducing abortive costs will be essential.
Finally, introducers should also look to take advantage of affinity marketing opportunities like those Blemain Group has been exploring with our own brokers. By pooling resources and working in partnership with lenders or other financial services providers, brokers will find they can reach larger numbers of customers with a lower cost per completion.
MYI: A recent report from RICs suggests that mortgage approvals edged up at the end of 2008. Do you think this will continue?
GB: I don’t think anyone can predict what will happen at the moment. There is so much contradictory information appearing in both the mainstream media and the industry press and I would like to see at least 3 months of stabilisation followed by a period of steady growth before I would even begin to think about an upturn. Regardless of what happens, Blemain Group remains committed to the market and will continue to adapt our products to support brokers and help them complete more business.
