Technological developments seem to come thick and fast in the mortgage market and never more so than in recent years. New systems have been developed to meet rising demand for efficiencies and there have been a raft of new players in the technical arena that have sought to make processes and procedures faster and more cost-effective. This competition is incredibly healthy for the industry and aside from ensuring that the sector is at the forefront of the technology curve, there is also a market-wide benefit in challenging and contesting for every piece of the business process pie. In the sourcing sector alone we have witnessed development after development launched for the benefit of intermediaries, networks, packagers and lenders.
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Market development
Many of these have centred upon introducing new efficiencies into the process while others have focused more on broadening the range of services on offer. I’ve written many times over recent years about how systems and system providers have been fine exponents of co-operation if it results in creating more of an end-to-end process for mortgage brokers. This can be seen in vertical integrations with both client management systems and also with lender systems for the electronic delivery of applications. The broadening of the relationship and interaction that brokers have with sourcing systems has been nothing short of remarkable. For want of a better expression, the ‘face time’ that a broker has with the technology in their office is vastly more than in recent years.
Additionally, development can also be seen in more lateral areas such as integrations with conveyancers and insurance providers. These developments have proved successful as they combine two essential benefits to the broker; the offer of additional income without the inconvenience of an additional process. As a part of the mortgage sale, a broker has already entered almost all of the client data required to sell not just the mortgage but a variety of products and services and with a seamless integration with their chosen sourcing system, they now have both the desire and the opportunity.
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Adding to the armoury
The exciting new development is the ability to add entirely new products to the options that brokers can offer their clients. These are not mere developments to make something easier but instead are genuinely adding something new to the product armoury that intermediaries have available.
Secured loans are an excellent and exciting example of this. A sector that has been accused by many brokers in the past as being in some way unsavoury is now challenging for mainstream status and technology is playing a huge role in this. For my part, there is certainly a belief that this is a valuable and profitable area and brokers who are not, at the very least, viewing and reviewing these products are missing a trick. To give you some idea of scale; Datamonitor reveals that in 2004 a total of £32.6 billion of secured loans were taken out and predicts the figure will reach £35.4 billion in 2009.
Furthermore, with secured loans accounting for 11.2 per cent of the total mortgage market they deserve our interest as well as respect as a sector.
Enabler
We have always viewed technology as an enabler – a business tool to support but not dictate the business of a mortgage broker – and this should remain the continuing motivation of technology providers in the sector. The motivation behind development is also one of understanding movement in the market in terms of sales process and sales rationale. There is without a doubt a growing belief in the mortgage market that secured loans should be considered by mortgage brokers in order to comply with the spirit of ‘Treating Customers Fairly’ (TCF). It is certainly easy to see how many now feel it is inappropriate to recommend a remortgage with heavy redemption penalties when a secured loan would be more suitable.
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The role of technology in this instance is an important one, and one that touches on many aspects of the market. For those brokers who do not have access to secured loans and are uncertain or unfamiliar on how to enter this market, technology can place this facility onto their desktop.
Our view in developing a secured sourcing module was that we had an opportunity to create a solution for our subscribers who currently do not have access to a secured loan solution. We believe that this would address the TCF compliance needs of our subscribers and also present this new market to them in a fashion that would be integrated into a normal sales process and available instantly at point-of-sale.
What is relatively unique in this situation is the technology is not being used in response to a need and acting reactively but is actually capable in acting as a catalyst for the development of a market. There are thousands of professional mortgage brokers who would not normally consider secured loans but a new system presented at the right time in the right place can deliver this proposition to them at a stroke. There is certainly no expectation that this will change the profile of the market overnight, or a misguided belief that 25,000 brokers will have a shared secured loan epiphany, but it does play a part in helping secured loans make a push into the mainstream market. If new systems and modules can get it right then mortgage brokers will find sourcing secured loans as easy and safe as sourcing a prime mortgage.
Reviewing the structure
This ability for brokers to tap into the growth of the market is also likely to encourage many firms to review the structure of their business and their income. I have heard recent quotes that we are entering a period where many home owners will look to ‘improve’ not move’. If there is such a move towards home improvement, this brings with it a funding need that the switched on broker should be able to benefit from. You need look no further than recent issues of Mortgage Introducer to see how much exposure the sector is enjoying to gauge the potential.
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The spirit of co-operation I spoke about earlier is also interesting to consider as this has led to a far greater speed of development, as economies of technology, if not scale, can be enjoyed.
So, what is technology bringing to the secured loans party? I think that the new generation of secured loan systems and integrations are very well placed to bring tangible and wide-ranging benefits to brokers. The sale of the product itself can now be shown to support TCF and best advice and there is, of course, also the attraction of this resulting in an additional revenue stream. However, the main role for technology is to lessen the impact of accessing these products and this comes from introducing the new products into an environment of safety with compliance documents built into the process. Additionally, by leveraging the familiarity of processes and procedures within programs they’re already using, intermediaries will be more comfortable to make a secured loan recommendation.
Although secured loans sit outside for Financial Services Authority (FSA) regulation and there are fundamental changes to the Consumer Credit Act scheduled for early next year this is a product where documentary evidence is still the watchword. Just as with the FSA, the ‘reason’ for recommendations or not is still paramount and for brokers there should be a part of the technological toolbox that puts this at their disposal. With TCF so firmly in the minds of intermediaries and the FSA alike, being able to prove why you didn’t recommend a secured loan may well in the future take precedence over why you did.
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Finally, let’s never forget the most crucial things that good systems can offer; simplicity and ease of use. If client data is pre-populated into the application process for the new product and eliminates the need to re-key information it really is hitting the right notes. We’ll continue to take a collaborative approach to developing partnerships with other providers in the secured loan market to bring their propositions onto the desktop.
