The packaging sector has had its ups and downs but is enjoying a resurgence as new challenger banks, in a bid to reduce operating costs, seek to outsource more of the underwriting process to trusted partners. During the credit crunch, parts of the packaging world developed a reputation for being an easy means of avoiding lenders’ tricky criteria. Certain unscrupulous firms seemed to make a virtue of knowing all the weak spots and loopholes for brokers to game.
Thankfully, those companies did not survive the downturn and the ones that did were those with much sounder business practices, trusted by lenders and brokers alike to add real value to the mortgage chain.
One such firm was Complete FS, founded in 1993 by Mike Hill and Damian Cain, with Tony Salentino joining in 1997 as an equal-shareholding director. The team of three, who had previously worked together at Advance Mortgage Funding, set up shop in a tiny office in Southampton, a city that has become something of a hub for packager firms. Complete now has 16 staff.
Salentino says: “We can see the sea from our offices and often watch cruise ships sailing out.”
Hill and Cain left the firm in 2008 to set up student buy-to-let business Happy Homes, in which Salentino also maintains an interest. Hill continues to run the business but Cain is set to return to the Complete fold this month, as head of sales.
Salentino’s fellow director at Complete, Phil Jay, joined the packager in 2010 after more than a decade at BDS, a nearby Hampshire-based packager.
Salentino recalls how companies such as Complete evolved to replace the mortgage desks that many networks used to operate to help their appointed representatives place difficult cases.
“We thought: ‘What you really need there is expertise. You need knowledge of the quirkier lenders, the quirkier criteria.’
“Each of we three founders had our own specialism. I would deal with residential and more straightforward cases, Damian would look after what was then called ‘sub-prime’ and Mike specialised in secured loans. So, even from a very early stage, we had diversification.
“We were always a business-to-business company. We didn’t speak to the customer or give advice.”
The principles of the business have changed little over the years. Salentino recalls: “In those days, we carried out not too dissimilar a function from what we carry out now, which was to help the lenders with their marketing, distribution and awareness of products. We would bundle the client’s paperwork and submit that to the lender in a manner that allowed it to make an informed decision. And it was a lot more paper-driven then. There was not a lot of technology.”
The terminology has also changed. Salentino says: “We were simply known as packagers. There weren’t all these other terms that have entered the market over the past few years, like ‘aggregators’, ‘distributors’ and ‘specialists’.”
Then came the emergence of sub-prime lending, he says.
“It was the mid- to late ’90s when Kensington Mortgage Company started and it was probably the lender that made the biggest impact at the beginning. It came along with real innovation in terms of how it would assess a client, closely followed by GMAC-RFC.
“Those lenders were quite prolific for us and, as that arena expanded, we grew and so did our second charge, secured loans and residential side.”
The bridging area of the mortgage market has experienced rapid growth in recent years and some pundits even predict that annual lending may hit £10bn within the next four years. Rates have tumbled and are edging closer than ever to ordinary residential pricing.
Jay welcomes this but warns of the importance of ensuring that bridging is indeed the right solution for any given client and that there is always an exit strategy.
He says: “From a competition point of view it is great to see rates come down, but it’s about more than that. It’s about education and that’s where a company like Complete can add value.
“At the moment, brokers are often happy to go directly to a bridging lender without understanding the full ramifications of what the costs will be, such as excess fees. We are still getting calls from brokers saying ‘I’ve got this bridge with a lender and we now need to work out an exit strategy,’ which is worrying because you should always have those exit strategies up front.
“Securing the lowest rate in the world is fantastic but, if you cannot get the deal through and it costs the client time and money, the rate is not really relevant.
“At Complete, we tend to put most of our bridging loans with regulated lenders because they are very stringent in what they do and transparent in their pricing,” says Jay. “We find sometimes that some of the other smaller, non-regulated bridging lenders tend to hide things a little bit more. We will always try and put the deal with a regulated bridging lender first.”
Jay is not comfortable with the blurring of boundaries in some parts of the sector.
“Some bridging lenders are creeping into medium-term loans of more than 12 months,” he says, adding that, while a residential bridging loan cannot extend beyond 12 months, on the buy-to-let side some lenders are bridging for three to four years at higher rates.
“I’m sure the FCA would agree that it needs to keep an eye on bridging anyway. It is keeping an eye on buy-to-let, as we know, but I think it is also looking at the bridging arena to make sure the right product is sold at the right time,” he says.
Brokers are also grappling with secured loans as the sector is set to come within the FCA’s remit in March next year, thanks to the EU Mortgage Credit Directive. While some brokers have chosen to all but ignore the products for years, there is a growing argument that they should be considered alongside remortgage options for certain types of borrower in order to provide truly whole-of-market advice.
Salentino says: “We think it’s probably right that seconds are regulated. It always seemed a bit odd to us, the lack of regulation, especially when the rates were a little bit higher as well. So we embraced the fact that they were coming under the regulated umbrella and we think it will create massive opportunities for the broker community.
“Typically, you have secured loan brokerages and master brokers, but the other 12,000 or 13,000 intermediaries tend to shy away from them. We hosted a couple of events aimed at improving knowledge and helping the broker market understand secured loans as well as some of the other areas that we operate in.”
The team at Complete draw upon their collective expertise in many niche lending areas to devise solutions for brokers.
Salentino explains: “When challenging cases come in and, for whatever reason, we are unable to place them with one of our panels, rather than going back to the broker and saying ‘I’m sorry, we can’t help’, we try to go back with an alternative. It might be a second charge or a bridge.
“We think outside the box and offer brokers some options so that they can go back to the client and it isn’t just a ‘No’.”
For brokers who do not typically use packagers, the first question must be: what is the extra cost of doing so?
Salentino explains how Complete’s pricing works: “We charge £99 on receipt of the full application and up to that stage we charge nothing. So we don’t charge for sourcing and we will spend 20 minutes on the phone, talk to the broker about the case, get back to them with various options or, if they have chosen the lender, we’ll go back to them with the approval.
“We’ll attach all the documentation and application forms that are required. We’ll give them a ticklist of all the things they need to supply us with and, until this point, we have charged nothing. It is only when the client decides they absolutely want to go ahead that we charge the fee.”
Complete also takes around half of the proc fee, which is normally dictated by the lender.
While technology played little part in the old days of packaging, it is now key to the visibility and comparability of different mortgage options.
“Complete was the first company in the UK to launch a sourcing system that combined first and second charge mortgages, gave comparisons and gave evidence of research for both. We have recently added bridging to that,” says Salentino.
But he adds: “While an app or sourcing system is a great aid to the broker, it is no substitute for experience and knowledge.”
Developing that knowledge means investing in staff and Complete is supporting nine employees as they pursue NVQ programmes in customer service or team leadership. In addition, the company runs an initiative called Who Cares Wins, where staff can vote for colleagues who they feel deserve recognition.
Salentino says: “We collect nominations from members of staff who spot colleagues doing things right, like overcoming a difficult situation with a lender or dealing with a broker who is frustrated because a lender has a delay with turnaround, etcetera.”
Meanwhile, Complete is focused on building closer ties with different lenders in the market.
Jay says: “Some of the new challenger banks have spoken to us about distribution and how we can help them. They may only have lending targets of £150m-£200m but they see the value of trying to create relationships with a smaller group of distributors that can help them with marketing and processing so that they can maintain lower resources internally. It’s obviously very cost-effective for the challenger banks and the smaller building societies too.”
Some lenders are even placing their own underwriting staff within Complete’s offices.
Jay says: “We have an on-site underwriter for Kent Reliance based in our offices. The beauty is you know that, when you take an enquiry, you can physically go and speak to somebody about it who is the decision-maker and who can sign off that deal and issue the offer.
“We have just been approached by another lender that wants to put an underwriter in our offices, but I can’t name it yet.”
Outside work, Jay and Salentino are both passionate supporters of ‘Saints’ – Southampton FC. Salentino’s involvement with the club goes well beyond ‘fandom’ as he has coached at the youth academy for 14 years. Southampton’s training scheme is one of the best and Salentino has coached no fewer than 23 players who went on to play football for England.
“Can I name-drop?” he asks, before reeling off an impressive list of players he has worked with over the years: “Alex Oxlade-Chamberlain, Luke Shaw, who’s now at Man United, Calum Chambers, who’s at Arsenal, James Ward-Prowse, who is captain of the England Under-21 team. Then there was Theo Walcott and also Gareth Bale, who is the most expensive player in the world and was coached by us at Southampton.”
Salentino developed a particularly close bond with certain players. He says: “In fact, I recently appeared in a documentary on James Ward-Prowse because he stayed with us for a year as part of his scholarship programme.
“They put scholars into a host family and, because of James’s high profile and the fact that he had already broken into the first team at age 17, we were asked if we would look after him for a year. They wanted to protect him from that whole experience of being a first-team player and earning lots of money at such a young age.
“What’s nice is that James hasn’t forgotten that. We host a charity event every year for the Alzheimer’s Society, which Phil and I have both been touched by through our in-laws.
“James comes along free of charge and it was great to see the smiles on the brokers’ faces when he turned up.”
Every year the Complete FS staff and their lender partners look forward to Complete’s version of the Ryder Cup golf championship.
Jay explains: “I captain one team; Tony captains another. We invite the lenders along and, again, the money goes to the Alzheimer’s Society.
“It is a thank you to our lenders for all the support they have given us because, without them, we wouldn’t have a business. It’s not about good golf; it’s just about having a good time.”
During the golf challenge Salentino runs the residential team and Jay the bridging and commercial team. So far the score is two wins apiece.
Jay adds: “With the football and the golf, we like to combine our passions with work because sometimes it can be quite stressful. So to have some sort of release is quite important.”
Complete has also hosted a Lender Expo on England’s south coast for the past 12 years, mixing business with pleasure.
Salentino says: “This year we had over 170 attendees and 28 exhibitors. We had 12 keynote speakers throughout the day, which finished at 3pm, and then we had activities for all the attendees.
"There was golf, and we took people out on the Solent in three boats. We also had leisure facilities arranged at the venue so that everyone could go for a swim or a jacuzzi."
First seen on: mortgagestrategy.co.uk