‘Simplicity is the ultimate sophistication’, Leonardo da Vinci once said. And as any mortgage intermediary will tell you, when it comes to the specialist commercial mortgage sector, Leonardo was bang on.
Lenders who are serious about treating their packagers well review their systems with an eye for simplification. Anybody can make things more complicated, but it takes a touch of genius, and a lot of effort, to move in the opposite direction.
The commercial mortgage sector is, by necessity, more complex than its residential counterpart. But some lenders have been guilty of more complexity than others. For lenders, the length of a form can be irrelevant because all the documentation they deal with is standard. But for the packager and broker, with the choice of several lenders, why opt for a long form when you could fill out a short one?
Some application processes have become so convoluted they have lost sight of their purpose. The very definition of service suggests that focus should be on the serviced – the consumer. British business used to be synonymous with courteous care for the customer’s needs.
But the latter half of the 20th century saw a shift towards the needs of the servicer. As the use of technology increased, servicers strove for greater efficiency and more comprehensive data collection, often at the expense of the service offered to customers.
Changing focus
But current simplification in the commercial sector signals a move back towards focusing on the customer. Lenders’ customers are the packagers and brokers they deal with day to day.
Changes to make their lives easier prove commercial lenders are responding to packager and broker criticism. Instead of retaining practices which make lenders’ lives easier, the sector is moving towards putting the interests of brokers and packagers first. It’s a refreshing way to do business – and it has the right person in mind.
Making brokers’ lives easier
How can lenders make life easier for intermediaries? I would suggest it’s a series of small steps – not giant leaps. To get systems right you have to think like a sculptor, who produces the beautiful statue by chipping away the parts of the marble block which are not needed – it is a process of elimination.
Any lender considering simplification needs to think about who is involved at each stage of the mortgage application process. There are many people involved in taking a loan from enquiry to completion, and the individual interests of each participant needs to be considered.
There are the lenders’ needs to be catered for, the brokers’, the packagers’, the solicitors’ and that’s not even to mention the end customer buying or refinancing the property. If the process is to run smoothly, the needs of each player must be addressed.
While there are many ways to simplify a business, in the commercial mortgage sector revising documentation can have a major impact. The application form is one document which transcends the whole of the mortgage process.
The customer wants to provide the information easily; the broker and packager want forms that are quick and simple to complete; the legal side want to ensure there is no room for content manipulation and the lender wants to collect sufficient information on the applicant to create a sound mortgage offer efficiently. It’s not in anyone’s interest to make this form more complicated than it has to be. After all, ‘reduce the complexity of life by eliminating the needless wants of life, and the labours of life reduce themselves’.
Words of warning
However, I would offer a few words of warning for lenders thinking of streamlining their business. Don’t go too far. Legal documentation needs to protect the interests of both the borrower and lender and can be long provided it’s in line with the industry norms. Obviously, application forms shouldn’t be so short they fail to gather adequate information on the credit background of the customer.
Valuation forms are still required as automated valuation models have yet to be developed to address the complexities of the commercial mortgage sector. But, while we don’t want reams of information clogging up everyone’s time, shorter valuation forms need to be focused, providing all the necessary details to allow for adequate assessment of the security.
Perhaps the thing to take away from all of this is simpler than it might seem. If we listen to each others’ needs in this industry, we can make it an easier and more efficient place to do business. It took a long time for Mies van der Rohe to come round to the same conclusion Leonardo had made four hundred years earlier.
Less is more.
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