Distribution curveball

Phil Whitehouse tells Mortgage Strategy how MCI Club, the market’s newest mortgage club, plans to offer brokers extra

The mortgage market is thriving once again. Despite the odd blip – January’s lending figures were down year-on-year for all types of lending bar buy-to-let – the outlook looks rosy, with forecasts suggesting the market will grow to around £222bn this year and roughly £240bn in 2016.

After years of being held up as a pariah, even mortgage-backed securities have received a surge of interest in the past year or two. This has allowed several non-bank specialist lenders to come to market.

Things are also looking up for the broker market, with predictions that intermediaries will account for around 75 per cent of all business within the coming years. Clearly the message is getting out as the Institute of Financial Services reports a 16 per cent year-on-year rise in the number of people registering to take their CeMAP qualifications.


But what about distributors? While new brokers and lenders appear to be entering the market, the trend for networks and clubs seems to be the opposite: mergers and acquisitions. It is very rare these days to see the launch of a new club or network of any size.

Joining the club

So why would one bother setting up a mortgage club in today’s market when the directly authorised space is dominated by two giants in the shape of L&G Mortgage Club and PMS?

It is all about offering something different, says Phil Whitehouse, the long-time distribution guru who last year helped to launch the Mortgage Compliance & Insurance Club – known as MCI Club.

MCI Club is different from most clubs in that the only brokers who can access it are those who use MortgageKeeper, the group’s compliance and administration back-office system. It launched in October, piloting through a select number of MortgageKeeper users, with plans to allow the remaining users to access it later this year.

Talking to Mortgage Strategy, Whitehouse says: “Why did we launch? It was obvious we had the opportunity to add something really different and special for our members, which other mortgage clubs would find it quite hard to replicate: we are all under one roof.”

So what are the benefits that Whitehouse refers to?

“Technology is at the heart of what we do,” he says. “We can constantly strive to give our members technology benefits if they start to use our club. They will get more efficiency in the sales process and their compliance needs as well.

“There are a lot of automated features that can go on behind the scenes so the broker does not have to get involved, but his back office can be pre-populated by a lot of the information he keys in.

“With the plans we have, the broker has to key in the customer data only once. This then pre-populates all the other areas he gets involved with, whether that is feeding into the insurance quotation system or feeding into his back-office compliance. In the future, this will revolutionise the way the broker deals with his customers.”

The pace at which technology advances is rapid – and the same can be said for MortgageKeeper and MCI Club. This year, the group will introduce a function that will see a broker’s customers approached automatically for things such as protection.

“This will allow brokers to revisit needs identified at the first stage of the mortgage, but at a later date,” says Whitehouse. “This can really help that broker to make a difference and ensure these things are done at a latter stage.

“A classic example is life cover. If the customer says they do not want to do life cover now, the system will recognise that and prompt the customer in six months without the broker having to do anything. It will automatically fire off a revised quotation based on their age six months later.”

Additionally, MortgageKeeper users have around 10 per cent of their cases checked.

But surely brokers can obtain these services from other firms in the market? Whitehouse says: “They would have to go elsewhere and get a bolt-on proposition if they started to add up these enhancements. They are getting it free as a member of MCI Club.”

He reveals that the club is in talks to offer commercial and second charge loans. “As we launched at the back end of last year, we are concentrating on the mortgage, life and compliance proposition first. But we are in talks with suppliers for things like secured loans, commercial and products of that nature,” he says.

“We are looking at them but we want to try to stick to our core strategy. We don’t want to put so many products on the shelf that brokers are confused about what they get from us.”

While the benefits for brokers are apparent, less obvious is why lenders would choose to operate with a new club when there are a number of established players in the market already.

But Whitehouse says MCI Club’s advantage is that it knows brokers a lot better than other clubs because access is restricted to those who use MortgageKeeper. In today’s mortgage market, where ‘Know your broker’ is imperative for lenders, this could prove a powerful differentiator.

“Lenders were keen to go on our panel because we can give them data and information about brokers that they can’t easily get from other mortgage clubs,” says Whitehouse.

“Most lenders would want some facility in place where they knew a fair amount about their customers. And clearly we do, because our customers use our software.

“We certainly hit the target where lenders are concerned. We are really pleased that lenders know our brokers as well as we do.”

So how big does Whitehouse believe MCI Club can get?

“If we were doing something like £2bn-£3bn in the next 18 months, it would be a job well done in a very short space of time,” he says.

“There is no logical reason why we can’t get to that fairly quickly. It would put us fairly high up the pecking order of mortgage clubs.

“Clearly, you have got the big two out there – L&G and PMS – and then you have quite a few other clubs doing about £2bn-£3bn, so we would be competing straight away with that sort of club.”

Formative years

MCI Club’s plans are ambitious, but what about the man who was brought in to realise them?

After a stint at college – during which he was presented by a careers adviser with the three employer options of the nearby coal mine, a high-street shop or the local chemical plant – Whitehouse spent two years as a management trainee at a printing firm.

Unable to endure the wrath of a universally feared, dictatorial boss, he moved on to construction company R M Douglas, where he worked in the purchasing department and honed his negotiation skills.

But in 1975, Whitehouse took his first step into financial services. He says: “I saw an ad for a management trainee job at Leeds Permanent Building Society, which would lead to becoming a branch manager. I wanted to better myself and was after a career, which I felt this offered. I was really keen.”

Whitehouse became a branch manager in 1979 at the age of 25, taking control of the West Bromwich branch – a location with additional perks.

“I’ve always been a big West Bromwich Albion fan and you can imagine the buzz it was for me when players I saw on a Saturday walked in looking for a mortgage.”

Whitehouse moved through a number of branch and district manager roles until 2000, when, after 25 years with Leeds Permanent and its subsequent parent, Halifax, he was made redundant with 150 other members of the ‘old guard’.

“When you’ve pulled yourself out the other side, it’s amazing how you can look back on those 25 years with fondness and remember the good times,” he says.

“It moves you on and develops you as an individual. It taught me that the idea of the one-company man is a bit of a dream in the modern world. So I started again.”

Whitehouse joined distributor Pink Home Loans, progressing over seven years from project manager through other roles to become head of supplier relationships.

In 2007, The Mortgage Alliance came knocking, inviting Whitehouse to head the entire business, then owned by the former Abbey for Intermediaries.

He says: “It was the first opportunity for me to be the person in charge making the decisions. At Pink, there wasn’t as much autonomy as I would have liked in my role, but at TMA the buck stopped with me and I was backed by a great brand in Abbey.”

When Whitehouse joined TMA at the start of the financial crisis in November 2007, the company was making heavy losses. But by 2012, it had been returned to profit.

In fact, under Whitehouse’s leadership, TMA became sufficiently successful to prompt the acquisition in 2011 by LSL Property Service’s financial services arm, First Complete, for £250,000. The move was almost serendipitous because LSL had already acquired Halifax Estate Agencies and Pink Home Loans – both previous employers of Whitehouse.

Going it alone

Following the acquisition, Whitehouse remained in charge of TMA until August 2012, when he negotiated an exit and launched his own consultancy service, which is still running today.

He says: “I felt I had contributed as much as I could to TMA at that point and I decided to start my own brand, which has allowed me to offer my services on a freelance basis and to work at my own pace. It suits me down to the ground.

“I was confident in my own abilities and knew I had a wealth of experience. But there is the element of fear about whether people will accept you without a massive brand behind you. It was just me, offering what I knew.”

In 2013, Whitehouse launched a second business, Creative Broker Solutions, to help match intermediaries with products and suppliers in niche markets that they could not otherwise access.

However, the lure of creating and running another mortgage club – and competing with the established participants – proved too much. He says: “There is enough room for everybody to survive.”

And what about the market? A major issue that has been discussed in recent months is proc fees. Distributors and intermediaries have called on lenders to raise fees to reflect the increased workload heaped on brokers by the MMR. The calls have led a few lenders to increase commission but some brokers argue that they should go further.

Whitehouse, however, believes proc fees will not rise much higher. He says: “It is always nice for brokers to increase their income but I think we are now at the point where lenders are comfortable and have recognised that there was some catching up to be done. I wouldn’t have thought lenders would be happy to get into the 0.7 per cent fee that I have heard bandied around.

“And, of course, brokers have the ability to charge for their professional services and for any other products and services they provide. The proc fee is just one part of the equation.”

In the post-MMR environment, lenders have come under fire over their service levels and their sometimes “bizarre criteria”, to quote brokers.

Whitehouse believe lenders should ease up on their criteria in certain areas. “There are a lot of people in the market who have not been able to get mortgages where previously they would have done. There have got to be some sensible criteria changes,” he says.

“But there is not going to be wholesale movement back to the criteria of the credit crunch days, for all sorts of reasons.”

This extends to 100 per cent LTV mortgages too, he says.

“There has recently been some talk in the press of lenders returning to 100 per cent LTV loans,” says Whitehouse. “I see nothing wrong with the concept as long as the customer is aware of what they are doing and does not just jump into it. Even though they are not putting a deposit down, they still need to be a borrower who wants to pay the mortgage back.”

He continues: “Where it could go wrong is if the market got completely swamped [with 100 per cent LTV loans] and customers who shouldn’t even consider purchasing a property jumped into it because they didn’t have to put a deposit down.

“If we do the right vetting and credit scoring and ensure they are the right customers, there is nothing wrong with the concept of a 100 per cent LTV mortgage to help first-time buyers onto the property ladder.”

Whitehouse also thinks lenders should begin to differentiate themselves through competition for service.

“It is OK having great products but speed and efficiency are absolutely vital for brokers and customers alike,” he says.

While lenders have a challenge on their hands, so too do distributors. But Whitehouse plainly believes that few mortgage clubs offer the services provided by MCI Club.

Time will tell if the model proves a success but the signs are clear that the distribution landscape is changing.

Published by Mortgage Strategy