Since the pandemic, the mortgage industry, alongside many others, has shifted to a hybrid working model. Although this model introduced innovative working methods, it also presented challenges.
One of these challenges for brokers is the inconsistency of underwriting between market lenders.
It has been suggested that the inconsistencies exist because many mortgage underwriting teams are still working from home, either full-time or part-time, causing problems in the chain of command.
The broker can have a greater impact by ensuring they submit the case to the right lender to begin with.
Visionary Finance Managing Director Hiten Ganatra says, “Working from home doesn’t work.
Although the underwriting process requires application of the loan policy, Ganatra explains that there is invariably a degree of personal interpretation or subjectivity regarding policy guidelines.
“Before the pandemic, the variability we saw with underwriting was very isolated, and as mortgage brokers we were confident we were getting consistent lending results. This is no longer the case today. »
He adds: “The collective approach in a shared environment that the underwriters previously worked in certainly helped as it allowed them to bounce ideas and cases off of each other. Remote work does not allow this because it stifles the possibility of sharing ideas, simply because of logistics. »
I would welcome any discussions with lenders to help improve where we currently are. We owe it to the end customer
There have been multiple changes in lending policy across the spectrum to reflect the post-Covid world. Jeni Browne, director of business development at Mortgages for Business, says these internal inconsistencies are caused by lenders having a higher percentage of new hires than usual.
Browne adds: “There has been a lot of staff movement in the lending space due to the pandemic and the high number of enquiries. We often see a big difference between the approach of a new underwriter and that of an experienced underwriter.
However, Browne expects that to calm down as the rookies gain experience.
Working from home full or part time leads to delays and inconsistencies
The underwriting inconsistencies have been seen across the market and are occurring in both traditional and specialty lending sectors, which Ganatra says is “extremely frustrating”. He suggests that the problems have gradually worsened over the past six to nine months as the housing market has started to warm up, with the specialist and traditional sectors being affected in different ways.
Connect Mortgages Managing Director Liz Syms says, “The mainstream is usually more about ticking boxes and making computerized decisions. While this is consistent, there is often no flexibility, even with cases that are only slightly outside the criteria.
“Specialized underwriting is more manual and open to interpretation. So while there may be inconsistencies on occasion, for some applications an advisor needs the flexibility of this approach to underwrite loans to their customer.”
Lenders need to know that the current situation is not acceptable
According to Visionary Finance records, the time between submitting an application and receiving an offer has doubled since the pandemic, Ganatra says.
The average wait for a rental property loan offer is now 61 days, compared to 37 days in 2019, which is equivalent to a 64% increase. Ganatra says this is “simply unacceptable”.
He adds: “This is widespread in the industry and it is also true for residential applications, which have seen the time to receive an offer drop from an average of 23 days before the pandemic to 33 days in 2022. , up 43%. This is extremely detrimental to customers and undermines the mortgage industry as a whole.
We often see a big difference between the approach of a new underwriter and that of an experienced underwriter
These inconsistencies mean the application process can become disjointed and lengthy, Ganatra suggests, with the ultimate impact on the customer having to wait longer for a mortgage offer.
However, Browne says, “It can also be directly damaging to the broker. Ultimately, you are recommending a lender and your role is to be the “face” of the transaction, so any delay may be viewed by the customer as a failure on your part. »
Ganatra thinks a return to work would have the biggest impact on productivity.
“Working from home full-time or part-time leads to delays and inconsistencies that weren’t as prevalent before the pandemic,” he explains.
The time to receive a residential offer has fallen from an average of 23 days before the pandemic to 33 days in 2022, up 43%
While the work-from-home model is here to stay, a dedicated counselor assigned to each case will help improve consistency, Ganatra says.
“I’ll be the first to admit that brokers aren’t perfect, but lenders need to know that the current situation is not acceptable.
“I would welcome any discussions with lenders to help improve where we are now. We owe it to the end customer, don’t we? »
However, Browne says lenders’ individual approach to risk and underwriting enriches the market and means most borrowers get the mortgage they need.
There has been a lot of staff movement in the lending space due to the pandemic and high demand
She suggests, “The broker can have a greater impact by ensuring they place the case with the right lender in the first place; by pre-qualifying the application, then making sure they have all the documents the lender will ask for as standard, and verifying them before submitting them for review.
“If we place an application with the right lender, along with the right documents, that will help speed things up, for the majority of applications at least,” she adds.
The owner of the specialized financial center, Daniel Yeo, says: “There are many challenges, but the assessment of affordability and the protection of vulnerability are at the forefront.
“The Financial Conduct Authority recently wrote a ‘Dear CEO’ letter to lenders which outlined this, expecting firms to identify and adequately address the needs of the vulnerable customer. This, combined with affordability – rising inflation and interest rates and shrinking disposable income – means lenders need to be more vigilant than ever.
This article appeared in the June edition of MS.
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