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The trail book purchaser has revealed its new Guaranteed Run-Off finance products.
Trail book purchaser Trail Homes has announced the formal launch of its Guaranteed Run-Off finance products (GRO).
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The business said the launch of the GROs was in response to the increased demand from brokers looking to raise capital to invest in their business or looking to expand.
The organisation said the GRO represented a significant innovation within the finance broking industry as it will “enable established brokers to receive up to three times the annualised trail for the purchase of their book”.
Trail Homes said this was in contrast to the current standard industry purchase price of approximately twice the annualised trail due to market conditions.
Nick Young, Trail House founder and chief executive, stated: “Increasingly, we are being approached by very successful mortgage brokers seeking to sell a portion of their trail books as an immediate cash injection to fund further expansion or acquisitions.
“These brokers have an established track record and are also willing to guarantee the performance of their trail book in return for a higher sale multiple for the purchase of their book.
“For some years now, trail book run-off rates have been at abnormally high levels. Initially, this was due to borrowers refinancing during COVID-19 into cheap fixed-rate mortgages, then, in more recent times, from the lender ‘mortgage wars’ and the end of fixed terms.
“This has meant that trail book values have been significantly affected and the previous high trail book sale prices possible are now not realistic due to the multiple being primarily dictated by the prevailing run-off rate.”
The trail book purchaser will offer two GRO products to begin with, which it said will offset the post-COVID-19 trail book value drop and provide brokers with the certainty of achieving a highly attractive rate.
Trail Homes stated that it will purchase a portion of the trail book at a set rate of 2.4 times the annualised trail if the broker, during the first year, is willing to guarantee no more than 10 per cent run-off.
Alternatively, it said the company will pay three times the annualised trail if the broker is willing to guarantee 0 per cent run-off over two years, post-sale.
It confirmed that in each case the broker has the option to sell up to 50 per cent of their trail book and use the other half to maintain trails and fulfil the run-off guarantee (using the remaining trail book to top up the guarantee period, as required).
The business added that the current “Trail Homes model” is applied to the GRO products, which means that the broker will continue to service clients’ needs post-sale, while at the end of the GRO period, the trail book returns to a normal deal with the broker no longer responsible for the guaranteed run-off rate.
The new alternative finance facility followed Trail Homes’ launch of a new valuation service in September to help brokers obtain an accurate valuation of their brokerage as part of their growth or exit strategy.
[Related: New valuation service launches for brokers]
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