During last month’s Mortgage Business Expo a broker addressed a panel of commercial mortgage lenders and experts to state how frustrating he found it that he could not place a commercial mortgage with several lenders without the use of a packager.

This comes as no surprise to Liz Syms, chief executive of Connect Mortgages, which runs a packaging arm as part of its Connect for Intermediaries network.

Syms says: “Most commercial lenders will only accept business via a packager, or a large specialist broker.

Poorly packaged cases received from intermediaries directly are extremely costly for lenders

“The commercial process is more complex, and lenders do not have the same level of resources that they may have with mainstream mortgages to deal with enquiries from inexperienced brokers.”

Packagers, sometimes called master brokers, act as a conduit between brokers and lenders on complex cases such as bridging loans, mortgages for borrowers with a poor credit history, or houses in multiple occupation. Their tasks cover helping brokers prepare client documents, arranging valuations and sometimes dealing directly with the borrower.

Dynamo for Intermediaries mortgage club director Cat Armstrong says the role of the packager is to arrange “the smoothest application possible for the client and ensure their case goes to offer and completion as quickly as possible”.

We occasionally pass on second charge cases to a packager as they have more time and specialism in that sector

She continues: “They do this by developing a deep understanding of the specialist space and the lenders within it, in order to ensure correct placement in the first instance.”

Armstrong explains that packagers have an “in-depth knowledge of the underwriting requirements” of the lenders they deal with to make sure that relevant documents are provided by the customer.

Many packaging administration teams have direct access to underwriters, either by visiting their offices or on dedicated phone lines.

Armstrong adds: “Where the case is very complex an underwriter can request extra documents, or agree a case before it is submitted. This will mean that the complex parts of the case have already been flagged, discussed and accepted upfront.”

JLM Mortgage Services group director Sebastian Murphy agrees that packagers serve as an expert pair of eyes on complex loans, which saves lenders time and personnel.

We insist that, if one of our consultants is using a master broker for bridging finance, the specialist provides the advice and not our consultant

Murphy says lenders pay master brokers “to fully process cases, and often to organise and instruct valuations. This saves the lender from having to employ highly skilled processing staff and case managers, allowing it to concentrate on pure lending”.

He adds: “There will be a significant number of cases that don’t proceed, and poorly packaged cases received from intermediaries directly are extremely costly for lenders and can place a huge drag on their application-to-offer times.”

Murphy points out that packagers also provide advice that is useful for brokers and clients.

He says: “We insist that, if one of our consultants is using a master broker for bridging finance, the specialist provides the advice and not our consultant. This is made very clear to the client from the outset, once we have established that this is the most suitable funding option for their needs.”

Direct contact between packagers and borrowers varies from firm to firm. Syms says packagers at her business only work with lenders and advise brokers.

The role of the packager is to arrange the smoothest application possible for the client and ensure their case goes to offer and completion as quickly as possible

Last month, L&C Mortgages partnered with Brilliant Solutions to allow its advisers with complex home loan cases to use the distributor’s fee-free packaging and referral services.

L&C Mortgages associate director of communications David Hollingworth says the move “will allow our advisers to tap in to Brilliant’s expert knowledge when it comes to more complex cases”.

He adds: “That will help advisers who may not deal regularly with customers in specialist areas, such as those who have had adverse credit. That can give them additional resources to draw upon, as well as help to pull together all the necessary documentation to take the case through to offer.”

Mortgages for Business marketing manager Emma Stanley-Clegg says the fully authorised whole-of-market broker firm handles most of the business that comes its way itself, but it does “occasionally” pass on second charge cases to a packager “as they have more time and specialism in that sector”.

The commercial process is more complex, and lenders do not have the same level of resources

Typically, lenders pay commission of around 50 basis points on the size of the loan. If a broker uses a packager, a lender will add approximately another 30bps for this firm, to cover such costs as placement underwriting, marketing, distribution and instructing valuations.

Packagers are paid to spot and avoid bumps in the road that may drag a deal into a ditch.

This article featured in the November 2023 edition of MS.

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