The Credit Crunch

[russell cpanuk]

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Lenders have now paused many products or re-writing others, leaving brokers/merchants, very few products above 75% LTV, and customer income levels to high to work with. This is not new to the industry and has happened, a number of times before.

But what does it mean for you the affiliate?
Brokers/merchants will down size; they will remove the access staff and concentrate only on their more cost affective lead sources. They will try and work their existing database harder, and be very selective with introducers/advertising.

What should affiliates do?
Do exactly the same, down size your spend: only use the most cost affective keywords, and pause your higher volume “but more expensive keywords” as the return will may become less. Work your databases harder, and be very selective with who you work with.

How long will it last?
In my opinion, it will only take one lender to increase the LTV or income criteria and the rest will follow. They will then start fighting for business again, as they re-introduce their products into the market. I can not see any change being, this side of Christmas; however the only way the lenders make money, is by writing loans, so they can not sustain this for long.

Should I try other finance products?
Diversify is what affiliates are good at, if you haven’t already tried, take a look at the IVA/DM products, they will not be affected by this the same problems the secured/re-mortgage products.

Unsecured Loans/ Payday products, credit cards, bank accounts, will not be affected. Take a look through our directory of products, you will find them all there.

eFinancialAffiliates.com

[Blue fin]

Lenders have now paused many products or re-writing others, leaving brokers/merchants, very few products above 75% LTV, and customer income levels to high to work with. This is not new to the industry and has happened, a number of times before.

But what does it mean for you the affiliate?
Brokers/merchants will down size; they will remove the access staff and concentrate only on their more cost affective lead sources. They will try and work their existing database harder, and be very selective with introducers/advertising.

What should affiliates do?
Do exactly the same, down size your spend: only use the most cost affective keywords, and pause your higher volume “but more expensive keywords” as the return will may become less. Work your databases harder, and be very selective with who you work with.

How long will it last?
In my opinion, it will only take one lender to increase the LTV or income criteria and the rest will follow. They will then start fighting for business again, as they re-introduce their products into the market. I can not see any change being, this side of Christmas; however the only way the lenders make money, is by writing loans, so they can not sustain this for long.

Should I try other finance products?
Diversify is what affiliates are good at, if you haven’t already tried, take a look at the IVA/DM products, they will not be affected by this the same problems the secured/re-mortgage products.

Unsecured Loans/ Payday products, credit cards, bank accounts, will not be affected. Take a look through our directory of products, you will find them all there.

eFinancialAffiliates.com

Hi Russell, what ever happen to our discussion about joining you guys?

To highlight some of the points you raised (nice post) I met with a number of lenders last week and although the market is still stablising and we are starting to see LTV's getting back towards 80/85%.

I've been informed that there will be a lot of new and exciting products due towards the end of this year and of course then things will be buisness as usual with up to 90% LTV on adverse.

We may not see all the sub prime boys returning to the fold but as always this opens the door to others. Naturally as an affiliate choosing your partner wisely is a must and i've seen more than a few brokers unfortunately hit the wall during this crunch due to lack of business or a limited panel of lenders. Therefore it makes sense to choose a merchant that is whole of market.

The run into Xmas is seeing a real up turn (good news for all) so now's a good time to make some money.

[Michael_Anthony]

Can't say we've seen much impact from our merchants at all, but I understand that it's the 2nd/3rd tier brokers who are feeling the pain.

[tomj]

Russell, what merchants do you have?

T

[russell cpanuk]

Hi T

If you sign up and take a look around our directory, you will find many merchants “all within the finance industry” across all sectors. e-Financial Affiliates

We offer white label finance sites, http posts to integrate with your own forms, as well as e-mail creative’s and the usual, banners, I frames and text links.

[magenta]

i beleive that so long as there are people out there determined to buy a house or get a loan, the effects will be minimal, the sticks will move a little i.e. what was once considered a medium risk borrower will now become the high risk and the previously high risk will just have to wait a while longer for their credit ratings to improve.
All in all the economy has to continue, people have to be housed and the services you provide will still be useful to someone.

[RailyPhill]

Good post Russell

As a Mortgage Broker / National Mortgage Packager and sitting on a committee with 20 of my peers the credit crunch is a concern from the very top all the way down. Essentially you have just seen over the last 4/5 weeks a 40% reduction of mortgage and secured loan products from the market with some well known lender/brands closing.

You will note that a lot of the heavy adverse mortgages are now very difficult to place. You may want to be careful with your spend in this sector... rising interest rates and reduced LTV are not conducive for business.

[russell cpanuk]

Can't say we've seen much impact from our merchants at all, but I understand that it's the 2nd/3rd tier brokers who are feeling the pain.

Great to see, that you have such a good understanding of your own market. Your brokers are so lucky being the only ones in the UK, that haven’t had products pulled by their lenders. “Must be good to be you”

Only kidding Michael, your comment made me smile that’s all.

[RailyPhill]

Not sure how anyone can not be affected by this, unless all of the merchants only deal with prime business.

Luckily we as a Merchant have a broad spread of lenders/products and distribution channels so are less affected than most, but the uncertainty is not good for the market as a whole.

[JayFCF]

Not sure how anyone can not be affected by this, unless all of the merchants only deal with prime business.

Luckily we as a Merchant have a broad spread of lenders/products and distribution channels so are less affected than most, but the uncertainty is not good for the market as a whole.

Ok, the subprime market that has crashed only makes up for 8% of the entire mortgage market. Of that 8% a handful of lenders (or so they call themselves) do not want to take business anymore. This is due to the fact that they do not lend their own money and need to sell their books on before the investors will put forward more funding.

Regardless of whether certain lenders take a risk or not in increasing the LTV's many lenders that use borrowed many will never fully return to the way things used to be.

Anyone that can remember the mortgage market 10 years ago will know that you couldnt possibly get over 75% LTV in the sub prime market anyway.

I wouldnt say the "unlimited adverse" days are completely over but expect it to be a VERY long time before things get back to EXACTLY how they were.

Russell you are right in what you say, The best thing for everyone to do right now is to work harder.

Dont disregard 85-90% LTV deals as RUBBISH!! THAT IS LUDICROUS!!

Remember NO ONE can place these deals so when things pick up in 3-6 months you can GUARANTEE the client will still be looking.

Our database at the moment has 100's of cases on hold until january and if things haven't picked up by then, we'll call the client and tell them so and keep them on hold for another three months.

For most of you your leads will be your main source of income so how about changing your "thank you" page to read something like "Due to the current state of the market we can't help with what you are looking for but we promise to contact you as soon as something becomes available.

I hope this helps.

[Michael_Anthony]

"For most of you your leads will be your main source of income so how about changing your "thank you" page to read something like "Due to the current state of the market we can't help with what you are looking for but we promise to contact you as soon as something becomes available."

Or how about just setting fire to some money rather than waste it on PPC to send such a dreadful message to prospective customers.

Joking apart, if that really is the way things are for some affiliates they should either join us or pause their campaigns.

Russell, I should explain that two of our merchants are also lenders in their own right, and are selectively replacing lender products that fall out of the market with their own plans, using their own funds. It's only the lenders that are heavily dependent on securitisation that are being really badly hit - Picture being one prime example amongst many.

[JayFCF]

"For most of you your leads will be your main source of income so how about changing your "thank you" page to read something like "Due to the current state of the market we can't help with what you are looking for but we promise to contact you as soon as something becomes available."

Or how about just setting fire to some money rather than waste it on PPC to send such a dreadful message to prospective customers?

Im not sure how this is a "dreadful" message?

What your doing is NOT giving your customers false hope! Surely by being honest and keeping your customers informed they'll learn to trust you and use your services time and time again.

Or am I giving potential customers to much credit????

[JayFCF]

Another thing that springs to mind is that letting your customer know you'll contact them when things are sorted is inviting yourself to use there details again in the future???

[russell cpanuk]

Hi JayFCF

Merchants in this market will offer price per lead for higher LTV, if they get a mixed bag of leads. They will still pay for all applications, as it is very important to keep the deals going through.

Our merchants for example are asking affiliates who filter out the lower LTV to sell elsewhere, to leave their campaign. They are working on the basis of; wheedle out the affiliates who multi prop, change loan purposes and loan amounts, which in good times can hide in the volume, and the overall total of leads will be still profitable.

Our LTV will stay at 85% for the foreseeable future; as long as the affiliates stick to the rules of the campaigns, then this will not change.

I hear what you are saying Michael about “lenders in their own right” and of course you are correct, however these “lenders in their own right” are not used to the full force of the applications they are now receiving, every broker in the country is aware of these, and they are being inundated with applications. You will find that they will not do many more deals than they usually do on a month to month basis, its just that they are now in a very fortunate position to choose their deals and only deal the cream.

The unfortunate thing about the present market is that there will be casualties amongst the brokers, (there already has been) and supporting affiliates and networks will be the last to know. You will think your merchant has not been affected, then out of the blue, you will find that a Liquidators letter on your doormat.

Remember the saying, the bigger you are the harder you fall.

[JayFCF]

Things are really quite tough but with both RaillyPhill and myself working for two different mortgage packaging firms we'll surely will be the first to know of any changes.

I will keep you posted as soon the market starts to swing back into the affiliates favour.

Russell I have had a look at your site and I am impressed by not only the content but also by the knowledge you portray on this site.

Thanks for the advice.