Since the pandemic the mortgage industry, alongside many others, has moved to a hybrid model of working. Although this model has introduced innovative ways of working, it has also raised challenges.
One such challenge for brokers is the inconsistency in underwriting across lenders within the market.
It has been suggested that the inconsistencies exist because many mortgage underwriting teams are still working from home, either full time or part time, which is causing problems in the chain of command.
The broker can make the bigger impact by ensuring they put the case with the right lender to start with
Visionary Finance managing director Hiten Ganatra states: “Home working is not working.”
Although the process of underwriting requires application of the lending policy, Ganatra explains there is invariably a degree of personal interpretation or subjectivity about the policy guidelines.
“Pre-pandemic, the variability we saw with underwriting was very isolated and as mortgage brokers we were confident of achieving consistent lending outcomes. This is now not the case.”
He adds: “The collective approach in a shared environment that underwriters worked in previously certainly helped as it enabled them to bounce ideas and cases off one another. Remote working doesn’t allow this as it stifles the opportunity to share ideas, simply because of logistics.”
I’d welcome any discussions with lenders to help improve where we are currently.
We owe this to the end-customer
There have been multiple changes in lending policy across the spectrum to reflect the post-Covid world. Mortgages for Business business development director Jeni Browne says these internal inconsistencies are caused by lenders having a larger-than-usual percentage of new recruits.
Browne adds: “There has been a lot of staff movement in the lending space because of the pandemic and high application numbers. We often see a large difference between the approach of a new underwriter versus that of an experienced one.”
However, Browne expects this to settle down as the recruits gain experience.
Full- or part-time home working is leading to delays and inconsistencies
The underwriting inconsistencies have been seen market wide and are occurring in both the mainstream and specialist lending sectors, which Ganatra says is “extremely frustrating”. He suggests the problems have gradually become worse over the past six to nine months as the housing market has started to heat up, with specialist and mainstream sectors affected in different ways.
Connect Mortgages chief executive officer Liz Syms says: “Mainstream is usually more tickbox, computer-based decisions.
While this is consistent, there is often no flexibility even with cases that are only marginally outside criteria.
“Specialist underwriting is more manual and open to interpretation so, while there could be inconsistencies on occasion, for some applications an adviser needs the flexibility of this approach to secure lending for their customer.”
Lenders need to know that the current state of play is not OK
According to Visionary Finance’s records, the length of time between an application being submitted and an offer being received has doubled since the pandemic, says Ganatra.
The average wait for a buy-to-let mortgage offer is now 61 days, compared to 37 days in 2019, which equates to a 64% increase. Ganatra says this is “simply unacceptable”.
He adds: “This is widespread across the industry and is also true of residential applications, which have seen the time taken to receive an offer increase 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 large difference between the approach of a new underwriter versus that of an experienced one
These inconsistencies mean the application process can become disjointed and protracted, Ganatra suggests, with the ultimate impact falling on the client who has to wait longer for a mortgage offer.
However, Browne says: “It can also be directly damaging for the broker. Ultimately, you recommend a lender and your role is to be the ‘face’ of the transaction, so any delays can be viewed by the client as a failing on your part.”
Ganatra believes a return to the workplace would have the most impact on productivity.
“Full- or part-time home working is leading to delays and inconsistencies that were not as prevalent before the pandemic,” he explains.
The time taken to receive a residential offer has increased from an average of 23 days before the pandemic to 33 days in 2022, up 43%
If the work-from-home model is here to stay, a dedicated adviser assigned to each case will help to improve consistency, says Ganatra.
“I will be the first to admit that brokers aren’t perfect, but lenders need to know that the current state of play is not OK.
“I’d welcome any discussions with lenders to help improve where we are currently.
We owe this 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 because of the pandemic and high application numbers
She suggests: “The broker can make the bigger impact by ensuring they put 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 sense checking them before submitting them for review.
“If we place an application with the right lender, accompanied by the right documents, this will help to expedite things, for the majority of applications at least,” she adds.
Specialist Finance Centre owner Daniel Yeo says: “There are many challenges but affordability assessment and protecting vulnerability are right up there.
“The Financial Conduct Authority recently wrote a ‘Dear CEO’ letter to lenders that outlined this, expecting firms to adequately identify and cater for the needs of the vulnerable customer. This, combined with affordability — rising inflation and interest rates and decreasing disposable income — means lenders must be more on their toes than ever.”
This article featured in the June edition of MS.
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