The following piece about Eligible appeared in Mortgage Solutions on 29th May 2018.Click here to view the original article
Borrowers and advisers find suitable mortgage deals earlier if lenders were more open with their criteria, according to the Financial Conduct Authority (FCA), but critics argue the solution is more complex amid fears the watchdog may issue new rules that restrict the market.
The regulator wants more technology and market tools to indicate suitable products earlier in the application process, it was revealed in the FCA’s interim report of its Mortgages Market Study released earlier this month.
More innovation is needed among lenders, brokers and sourcing systems, the financial watchdog added as it looks at ways to encourage market solutions.
No black and white solution
Lenders should be more open with their criteria, but it is not always that simple, according to James Tucker, managing director of sourcing system Twenty7tec.
He said: “As a general principle we completely support the publication of more black and white criteria rules from lenders, as this can often lead to intermediaries and their clients finding the right product quicker and easier – creating better client outcomes.
“However, I would also acknowledge that not all criteria are black and white and indeed there may be strategic reasons why lenders do not wish to publish certain elements of criteria to the market.”
It can be difficult for lenders to draw clear lines on criteria where underwriters take account of the borrower’s overall circumstances.
Jeremy Duncombe, directory of intermediary distribution at Accord said: “While we agree that lenders should make their criteria as clear as possible for customers and brokers, it’s important that customers are not disadvantaged by prescriptive rules which take away the ability for common sense underwriting.
“At Accord we pride ourselves on providing principle-based lending decisions, with underwriters taking into consideration each applicant’s individual circumstances.”
Nicola Firth, chief executive of Knowledge Bank said it is not a matter of lenders being more open but having the means to communicate with advisers.
She told Mortgage Solutions: “We have found that lenders have been happy to be open and transparent and display their full criteria on Knowledge Bank.
“I think the barrier has been that, up until now, there hasn’t been an outlet for lenders to display their criteria in a uniformed and consistent way.
“It has also been very challenging for them to notify all brokers, networks and clubs when their criteria does change and notifying everyone at the same time can be particularly challenging.”
Lenders were typically supportive of criteria being open and accessible to brokers.
Craig Calder, director of intermediaries at Barclays Mortgages, said: “We make our lending policy available to all mortgage brokers via our intermediary hub.
“We have also made our lending policies available on two policy comparison sites – Criteria Hub and Knowledge Bank – available to any broker who chooses to subscribe.”
Charles Morley, director of mortgage distribution at Metro Bank, added: “The more information and help that can be shared early on with both consumers and brokers, the quicker it will be for suitable products to be selected.
“At Metro Bank, we ensure that our criteria is both easily accessible and also straightforward for both consumers and brokers to navigate, with a simple to use affordability calculator on both our consumer and intermediary websites.
“It will be interesting to see whether an opportunity exists to work more closely with sourcing engines and aggregators moving forward, in order to provide a more transparent decision even earlier on in the process.”
Open APIs could be the answer
The solution may lie within the market movement towards open Application Programming Interfaces (API) from lenders, Tucker suggested.
He said: “The advent and continued development of API’s should however enable lenders to provide seamless and fast decisions to intermediaries and their clients without having to reveal the full extent of their criteria, and we are seeing significant investment in this area of technology already.”
Rameez Zafar, co-founder of broker platform Eligible, agreed.
He said: “Many of us in the digital mortgage space are reverse-engineering lender methodologies.
“However if we could integrate with lenders or if the key inputs could be exposed via APIs, digital systems could instantly provide advisers, and in turn consumers, with a more accurate shortlist of products and loan amounts.
“We don’t believe there is a replacement for the experience of the adviser, but we know that digital tools can help streamline the process for advisers, consumers and lenders.”