Automated systems have previously been the preserve of more straightforward lending, but complex cases are on the rise.
Following the recent launch of Darlington Building Society’s mortgage platform, Chris Hunter, chief operating officer, has outlined the importance of technological innovation that goes beyond vanilla applications.
Read more: Darlington launches mortgage platform
Hunter said: “In this sector there’s those that do the [straightforward cases], where it’s about efficiency and price. There’s those that do adverse credit, which is about making products available for certain customers that may not get a deal elsewhere, and we’re somewhere in the middle of that, as a business.”
He added: “Just because our brokers have complex cases doesn’t mean that they don’t want efficiency as well, and good levels of service. We recognised that as a business a couple of years ago.”
This recognition led Darlington to its initial partnership with Iress in 2019, and into a period of transformation that moved away from manual processes and towards end-to-end, integrated solutions.
Read next: Darlington BS selects Iress technology
Automated systems have previously been the preserve of more straightforward lending, but complex cases are on the rise.
According to Statista data published in January, as of November 2021 there were more than 4.2 million self-employed workers in the UK, up from 3.2 million in December 2000.
These numbers have not risen steadily – seeing a peak in 2020 and a return to lower levels in the year since – but show an overall shift in the way the UK earns its money.
Meanwhile, Pepper Money’s January 2022 Adverse Credit Study found that 18% of the 6.29 million individuals with adverse credit in the UK intended to purchase a property within the next 12 months – equating to 1.1 million potentially complex customers turning to the mortgage market.
Hunter said: “We’ve always had the trend for more people to be self-employed, but not all lenders do self-employed lending.
“Then, there’s also the impact of the pandemic, which has affected people’s credit history, and you do need lenders to take a view on that.”
Other factors, such as furlough, have also made many mortgage applications more complex over the past two years, in a trend that Hunter said is likely to continue.
“From the building society’s perspective, we are well placed to cover that increased demand now and as the market evolves going forwards,” he added.
However, non-vanilla cases naturally come with a higher risk factor, which has hindered technological advancement in the past.
Hunter explained that mitigating this is a matter of combining tech innovation with human, manual underwriting – an element that is unlikely to be replaced in the near future.
“Despite the fact we’ve invested in the technology, all our cases will continue to be manually underwritten by an individual and not computers,” he said.
“If you want to do hundreds or thousands of cases a week, you need everything to be done automatically, but I feel we get the balance right between investing in systems while making sure we sure would continue to manually underwrite.
“You can never eliminate the risk, but you can mitigate that risk to get the right proposition for the broker and the customer.”
To this end, Iress provides Darlington with what Hunter refers to as an “assisted decision engine,” automating certain base processes and providing guidance rather than a final lending decision.
Hunter warned that there is a limitation to how far automation can go for lenders of Darlington’s size; while bigger lenders might have the balance sheet to support volume over quality, smaller lenders need to ensure they have good quality loans on their books, which currently can only be achieved via manual underwriting.
Nevertheless, he added that the residential mortgage market will continue to be driven by innovation and automation, no matter how much it sees an increase to the complexity of cases.
“Brokers don’t want a ‘slow no,’ and they also quite like to be told ‘yes’ quickly, irrespective of complexity,” he said.
“We want to automate as much as possible, because there are opportunities to grow market share, and if you aren’t using integrated systems, or have outdated technology, then you can’t take full advantage of those market opportunities.”
