We’ve done it. Platform has joined an elite group of mortgage lenders with the systems in place to provide a same-day offer.
We were delighted to receive so much positive press coverage in the trade press for the case, which was handled by Park House Associates and took a creditable five hours.
It is only fair to say that the pioneers who were there before us deserve plenty of praise too. These are still early days, but it is already clear that the mortgage industry is capable of turning an offer around in a few hours with ease, which has to be good news for brokers and their clients.
A sense of proportion
So, there are more than a few pats on the back deserved. But we also all need to keep a sense of proportion. Same-day offers are going to take off – in the coming months we will see them become an everyday occurrence. That said, fast offers can only be made if the risk is right.
This is why, to date, same-day offers are most suited for conforming and light adverse non-conforming mortgage business and maybe not for heavy adverse cases, although there will always be exceptions. The reason for this is obvious – where there are large and potentially complex financial liabilities, an underwriter needs to examine the situation in detail and often obtain evidence and perhaps talk to relevant parties. This is in contrast to a near-prime case, where information on a CCJ can be obtained within seconds through a credit score.
In the recent example where Platform offered a same-day offer, the case in point was typically suitable. It was a self-cert remortgage with a loan-to-value (LTV) below 75
per cent.
Because it was a remortgage, we already knew about the property. This meant it lent itself perfectly to an automated valuation model (AVM), enabling us to proceed quickly with the offer.
Too risk averse
Some lenders have said they are not sold on AVMs but it could be argued they are being too risk averse. Customers with the right profile, and where sufficient data can be gathered without a full survey, would surely benefit from a quicker turnaround.
On the other hand, there are already comments from some pundits that AVMs will become ubiquitous. I would question this. It may be that they are far more commonplace in the US but, in this country, we may need to remain relatively prudent.
It is also vital in my view that we talk to brokers about their views on automated underwriting and instantaneous offers. Of course, in most cases, they want the fastest possible turnaround. But, there are times when human input is more appropriate for the client. Both methods have advantages and AVMs are an invaluable vehicle to enable such functionality to operate.
AVMs draw on a vast amount of data from properties sold in the vicinity, the percentage of estate agent valuations received at sale and prices, with the data updated at least monthly.
On the other hand, they may not pick up on the full value of a property which has undergone substantial and high quality improvements or may simply be the one outstanding home on a particular road or perhaps have a far better position.
On the negative, a surveyor will also be able to make a proper judgement if there are problems, such as an older home which may have subsidence or other structural defects. Likewise, if a landlord is seeking a buy-to-let (BTL) deal, a surveyor will be best placed to see if the property is capable of achieving a stated rental income and as this data may not be available in many cases, we are not using AVMs on BTL at this stage.
Under pressure
AVMs potentially mean savings for lenders and in this hugely competitive market, this is something that lenders will welcome, but they will be a false economy if not used responsibly.
They will no doubt put some surveyors under pressure but, they will also free up professionals to focus on cases which need an expert appraisal – and this technology can also provide them with invaluable support.
The fact that same-day offers are happening is real cause for optimism. We’ll no doubt see quicker timescales being achieved, although speed must be balanced with ensuring risks are adequately assessed.
For example, Platform has set its maximum LTV level at 75 per cent, although others are higher. I am not saying we will not move our figure upwards if we are satisfied with the results, but we will only do so if we are happy with any extra risk that such an increase would entail.
Same-day offers have primarily been made available to brokers working direct with lenders. We are now seeing evidence that packagers are now getting in on the act and AVM technology is being linked to their systems. There remains scope for a lot more integration.
AVMs are currently used in around 20 per cent of mortgages and AVM data provider Hometrack predicts that over the next two years, this will grow to around 60 per cent of mortgages, which sounds high.
Meanwhile, the Council of Mortgage Lenders believes AVMs will account for a more conservative 40 per cent of all property valuations carried out in the UK by 2012.
It is welcome that offers can now be fast-tracked – and given time, we will probably start to see the right cases taking minutes rather than hours. In fact, it is hard to see where the next stage in this area will take us. Telepathic offers perhaps?
