To the outside world, lenders’ systems are largely digital and well-equipped to withstand the huge displacement of people we’ve witnessed during the pandemic. But behind the scenes, many seemingly automated processes are propped up or underpinned by sheer manpower.
Back-office staff worked tirelessly to manually connect disjointed technology during the pandemic creating the illusion of digital delivery, when in reality – these time consuming and heavily manual tasks were stopping experienced staff adding real value to the lending proposition.
Those teams, working remotely, who kept the lending lights on should be applauded. But in the long-term it’s not a sustainable way to work, from a cost or sanity perspective.
Our latest mortgage efficiency survey highlighted the disappointment held by smaller regional building societies in all but their pre-Decision-In-Principle technology.
When asked to score their satisfaction with the level of automation and technological integration of their complete mortgage application process, regionals gave a 2.8 (5 being the highest). That’s the same score as last year and the lowest across the lending institutions. Offer to completion scores told a similar story.
So after mortgage lending reached record highs in H1, restoring lenders’ confidence in the housing market and boosting their budgets, now is the perfect time to invest in technology to build and deliver a better experience for both brokers and borrowers.
Fleet of foot
When you think of the scale of upheaval thrust upon the market, lenders were quick to react. Amid a perfect storm of conditions, a lack of housing supply, changes in homeowners’ buying appetites, low interest rates, and the stamp duty holiday, lenders reached a record lending level of £43.8bn in June.
Add in the need to offer and process mortgage deferrals, implement furlough criteria, increase manual underwriting, work from home, and ramp up the use of Automated Valuation Models (AVMs) and we can clearly see our market has the capacity for rapid change.
Nevertheless, those with less tech embedded in their processes struggled.
For smaller regional building societies, the high volumes and need for remote working highlighted the frailties in their systems and processes.
When the offices were fully staffed it was much easier to throw people at problems, masking weaknesses in technology. But when staff were forced to work from home – the cracks were harder to paper over.
Our efficiency survey found that over the 12 months since our last survey, smaller regionals had suffered with timing issues, higher declines from DIPs and lower referrals which one lender said was “symptomatic of the difficulties of underwriting remotely”.
More than a third of DIPs took between 31 and 40 minutes to secure with just 7% completed in 10 minutes or less.
Although challengers and specialist lenders are faced with similarly complex cases, thanks to not having legacy IT systems to hamper them, around 75% of their DIP decisions were turned around in 10 minutes. When it came to the time taken to complete a full application, regionals were the only ones to report cases taking between 31 to 40 mins.
No time to stick around
Here’s the painful truth. Under the weight of an inefficient mortgage processing system even the most solid broker relationships will give way. There is simply too much competition from other lenders offering niche products and bespoke underwriting supported by faster, smarter tech.
In Q2 intermediaries’ business volumes reached the highest ever levels recorded by IMLA. Quite simply they have no time to stick around, nor do they need to.
What’s more, a clunky and hard to navigate system not only haemorrhages repeat business but generates lots of enquiries from frustrated brokers that take even more manpower to deal with.
Opportunities for regionals
Drawing on the positives from the last 12 months, smaller regional building societies quickly adapted to using AVMs and electronic signatures proving that when fired up, they have great capacity for rapid change. So why not direct this energy towards their mortgage processing tech to take advantage of lending opportunities ripe for the picking?
Employ product transfer technology so you can redeploy your people to other parts of the business.
PT volumes were four times higher than remortgage transactions in the final quarter of 2020. They are a cost effective way of retaining borrowers and an online automated process for brokers and borrowers will cost less overall than employing people to do it manually.
Some lenders are developing digital direct journeys to meet the increasing consumer demand, particularly for straight-forward ‘vanilla’ mortgage lending. Another growing trend is the connectivity of broker CRM systems and sourcing systems with lender sales and originations platforms to replace the unnecessary rekeying of applications submitted online by brokers that smoothly delivers information to start working immediately.
Automation won’t undermine your manual underwriting proposition, it will make it sustainable under any circumstances.
We’ve proved we can cope in exceptional circumstances, now it’s time to excel.
Steven Carruthers is head of business development – mortgages at Iress
