That change is upon us is not in doubt. What is breath-taking is the volume of that change. From a systems and process point of view, it has the potential sometimes to feel overwhelming.  

Just as lenders thought they had a window to reengineer their legacy thinking, systems, and processes off the back of spectacular lending during the pandemic, then the urgency and scale of that need quadrupled. A new era of volatile interest rate movements, concerns about affordability and product criteria, and the issuance of Consumer Duty rules has meant that what is required of our mortgage processing systems is in a constant state of flux. 

In terms of mortgage originations, lenders have faced challenges in recent weeks of getting products in and out of the market swiftly without incurring losses in margins or service. An era of low interest rates has put to the test product launch and withdraw processes that had not required such speed and agility in the period of static base rates. Service was put under huge strain as brokers rushed to secure pricing on products. Agility and scalability have been pre-requisites of efficient processing that has remained frustratingly out of reach for many lenders. 

But hot on the heels of any origination issues come the need to record and evidence Consumer Duty regulation. No-one has really said what this will look like from a system point of view – much of the expectation appears to be with the broker. But history tells us where good outcomes do not occur the buck usually stops with the lender. Whether there is a need to record the fact that certain procedures have been met or actually record the detail of those checks and undertakings is unclear but either way evidence will be required, and changes will be needed in systems.  

Solutions are to hand, but they are manifold and need careful thought. From devising the business case, understanding what is required, getting the right partner to help deliver it, and securing the correct contractual arrangements to do so, there is plenty that can go awry if care is not taken.  

The pandemic encouraged many lenders to embrace cloud solutions – indeed the cloud allowed many businesses to survive the pandemic when they might otherwise have withered. Now, financial services is awash with providers delivering agile systems that offer robust scale with more affordable pricing – making the business case for change almost unassailable. But the opportunity is more than ending legacy headaches and the associated huge invoices for incremental and lengthy changes. It is crucial to avoid a simple lift and shift if lenders are really to get the most value out of any decision to re-platform their business.  

The world is evolving more quickly than most of us would care to admit and the systems architecture that has served many lenders since the 1980s is not built to deliver as efficiently as it needs to in this new world. As more and more demands are made of mortgage selling and servicing, the time is indeed right to make a new start but also ensure decisions are taken with eyes wide open.

Rob Walker

Director,

Coeus Consulting