FTAdviser.com

Advertising

CV: Mr Berry joined GE in 1996 as a business development manager with Fleet Services in Brussels. Before moving to GE Money Home Lending in 2005, his career highlights included leading acquisitions and partnerships in Latin America and Japan. He also led a multi-product consumer finance sales team in France, accountable for mortgage, auto and cross selling, before becoming integration leader in France integrating Royal St Georges Bank and growing GE's debt consolidation business in France.

MA: How did you move into your current role?

DB: I have been with GE Money for about 11 years and I spent about half that time in the commercial finance division. I moved into this role about three years ago from GE Money's French business, where I had a range of sales and marketing roles.

MA: What were you tasked with doing?

DB: At the time we had just finished the process of integrating iGroup and First National. It was really a case of taking our acquisitions and turning GE Money Home Lending into a major presence in the intermediary mortgage market. When you buy companies you have to take the best bits of what you bought and turn GE Money Home Lending into a major player across the whole of the non-conforming mortgage market. It involved expanding distribution and the breadth of the products that we offer.

MA: Has your focus changed recently? Last Christmas GE Money Home Lending confirmed it was looking at building the number of distribution partners it had. Is that still the goal?

DB: In the last few months I have spent a lot more time looking at how the market is going to evolve and as you would expect we are very conscious of the fact the funding situation has changed. We are luckier than most but are not immune to some of the challenges in the market. We are very much looking at what kind of assets we are originating, how individual distributors are performing and managing pricing criteria on a day to day basis.

MA: How has GE Money Home Lending's funding lines been affected by the credit crunch?

DB: In our business we continue to have the same method of funding that we have always had, which is internal funding through GE's Treasury operations that are managed centrally. What GE does is allocate certain amounts of funding depending on the profile of assets we are originating. We try to work with them to make sure we are optimising the profile of assets we originate.

DB: How have you tightened your lending criteria?

DB: We have tried to ensure we hit the investment hurdle rates, which have gone up as a reflection of more volatility in the environment. Essentially the hurdle rates are the minimum profitability targets we have. It is essential we have a blended mix of assets that are well positioned to perform in a down turn and the way we achieve that is by lending criteria and our point of sale scoring system.

MA: What is the core mortgage proposition in 2008 and how greatly does that differ from your offerings in 2007?

DB: What we are trying to do is focus still within the non-conforming market but on customers who are perhaps nearer prime than we have done in the past. Certainly it is a lot harder for customers who have severe credit issues to refinance at the moment. We are focused on the customers who have gotten into trouble but it is a blip and we can help them get over it. There are good quality customers but the high street banks are nervous and conservative towards them in the current climate.

MA: So, is it all about picking up near prime customers who can no longer get a deal from high street banks?

DB: Yes.

MA: In April, you launched a buy-to-let product. How has this been received?

DB: We are going to stay a specialist lender so we will continue to play in the non-conforming market and niche prime market, which is customers who today cannot find a home on the high street, and to a limited extent buy-to-let. For the last two years we have had a buy-to-let proposition but we have never been one of the big players in buy-to-let. Buy-to-let is an asset we are comfortable to originate but not in large quantities at the moment. We are trying to make sure we deal with customers that we understand. It is not a good time to jump into the deep end with customers you do not really have a lot of experience with. With buy-to-let we are trying to deal with more experienced landlords and learn that market.

MA: What issues are lenders seeking funding for mortgages facing now?

DB: We are talking now about how to deal with overhang of assets on investment banks' balance sheets. We are not sure a lot of overhang has been taken away. What concerns me is house prices are much more to do with the overall economic climate, inflation, lack of liquidity all creating a vicious circle. While the fundamentals of the UK market remain pretty good – demand looks like it will continue to outstrip demand for at least the next 20 years – but there is the risk of dips in the short-term.

MA: Does GE Money Home Lending intend to increase its market share in the current climate?

DB: Our market share has definitely gone up significantly in the last few months. What we are also seeing is lower levels of redemptions, so our customers are tending to stick with us. We are growing and we see that as a good thing but we are determined to do the right thing for customers and be sensible with underwriting in a downturn. We are not focused on volume numbers but getting the right mix of customers. Our focus is that we want to be around for the long-term so we need to be sensible. The market is volatile and you find a lot of lenders saying if they put out a good product they get swamped with applications.

MA: How does the relationship work with your overall parent company?

DB: We are 100 per cent owned by GE. We are a separate business unit and run our own business but we agree budgets and funding requirements with GE and that is fairly tightly managed. We are able to make our own decisions but clearly around credit risk and finance there are guidelines. We certainly spend more time talking about those corporate functions when there is a downturn in the market. We are keen to make sure we continue to talk to GE and have support by doing well in a difficult market. This market is moving so fast but GE really understands what is going on.

MA: Would you consider offering mortgages direct to consumers?

DB: It is something we have thought about but it is not part of our current planning. We are very happy doing mortgages through intermediaries but what we are looking to do is have a programme for existing customers to see whether we can sell them a different kind of product. We have always tried to be very transparent with the intermediaries and there is quite a lot of noise about the lack of transparency but our view is if you are clear and fair then people are generally happy with that.

MA: What are the major challenges facing GE Money Home Lending?

DB: The challenge facing our business, like any other mortgage business in the UK is managing the economic downturn that is putting pressure on our customers' ability to meet their financial commitments and that includes mortgages. We are developing programmes to try to identify customers that might risk getting into financial difficulty and making contact before they do. We can come back with ways to reduce their monthly payment and avoid trouble. We are making sure we are flexible with customers that have gotten into an arrears problem. We have a partnership with a charity that does debt counselling. Often you find if you have customers deal with issues they have got early on they can be fixed. When customers tend to get into trouble is when they have a bit of an ostrich mentality and they do not try to sort out the issues they have got until it gets too late. We often do not get the first line of sight as customers will try to continue to pay their mortgage even when they are unable to meet other commitments like credit cards or personal loans. What we try to do is find out what the overall financial situation of the customer is so we can help them with any problems they might have.

MA: How are you reviewing the quality of mortgage business generated by intermediaries?

DB: We always look at the quality coming through from distribution partners. We will only deal with people we can get quality business from. We do not have a target number of distribution partners. What we manage to is a quality standard. Many distributors have had to restructure, cut staff and have lost quality, experienced staff because of changes in the market. If the quality of packaging and deals coming in has not been as good as it has been in the past we will work with them to make sure they meet minimum standards. Ultimately, it is about good business sense and making sure the customer gets the product they think they are going to get. If the adviser puts the application through to the lender in time we make sure they get that mortgage. A lot of the last few months has been disappearing deals leading to customers getting frustrated and this costs intermediaries and us money.

MA: How do you work with distributors to improve the way they work?

DB: We are quite good at producing management information so we try to give them information as to how they are doing against their peer group. We have a dedicated team that can go into a business and spend two or three days with an intermediary to help them restructure. We will help them adapt to an environment where they might have to cope with less staff and hopefully we will all benefit with better quality deals.

MA: Have intermediaries accepted this help or have you had to tell advisers you will no longer do business with them?

DB: What we have found is intermediaries do not like being kept in the dark. We try to have clear dialogue and say these are our standards and particularly in today's environment it is a tough time and if people want to get through it they have to have a structured programme and maintain standards as they go through that process. Firm but fair is how we wish to do it.

MA: If intermediaries do not improve would you stop doing business with them?

DB: Yes. Part of the deal is you have to be fair to people and the same applies to procuration fees as well. We are very comfortable paying decent procuration fees but only if we are getting a good quality of business. We have a regular review of procuration fees where we look at the kind of business an intermediary has brought to us, the quality of the packaging, the credit history and how quickly they have turned it around. It is also about how we have done and what we could do to better work together.