The days of sourcing systems are numbered. This might come as a surprise to many brokers and lenders that have recently invested in this over-hyped technology. There’s a simple reason for my believing that traditional sourcing systems will soon be viewed with the same rose-tinted affection as the VCR or the transistor radio – it’s the technology itself.
Never standing still
Like time, technology never stands still. It is constantly evolving and improving and even when the latest gizmo has just hit the market, it has already been superseded by developments in the lab. For brokers, each exciting new development increases the ability to add entirely new products to the suite of options they can put in front of clients. A case in point is secured loans – more of which later. But back to the atrophying beast that is the mortgage sourcing system. The problem with them is that they do little more than provide a best guess based on limited criteria. The results and accuracy of any sourcing exercise will be based upon the information declared by the client. In other words you can only expect to get accurate information out of a system if accurate information has first gone into it.
As we all know eligibility for many of the lending schemes promoted is strictly controlled by the clients’ credit profile and the property value. Those systems that can deliver this information to the adviser prior to undertaking the mortgage sourcing exercise will obviously enhance the advisers’ ability to find and recommend the most appropriate option available. However sourcing systems that do not encompass this feature risk the possibility of case rejection by the lender following submission. The increasing cost of application and booking fees and the non-refundable nature of many means that clients could lose substantial sums of money should they fail to meet a lender’s scheme requirements.
Open to manipulation
They also have a fatal flaw in that lenders know how they work. That means that they are open to manipulation and I am sure some lenders have tinkered with their deals to make sure they come top in the tables. True, sourcing systems are now improving their technology and upgrading their systems to give lenders the ability to connect their front-end decisioning systems. This allows for complete data transfer of decisions-in-principle and applications, accelerating the sales process. However, they tend not to cope too well when affordability calculations are entered into the equation, as they frequently are. One difficulty preventing their easy inclusion into the software is the fact there is no such thing as an industry standard.
In fact, where lenders do use affordability calculations, some sourcing systems will simply revert back to an income multiple in order to quote a maximum loan amount. Lenders have been asked to divulge the formula they use for some time but have been reluctant to do so. Another problem with sourcing systems is that information supplied by lenders, or input by the software suppliers is sometimes incorrect. That is why they have been overtaken in the market by the secured loan sourcing systems. In fact, we don’t even call them sourcing systems anymore, far too passé, what we are offering is a true underwriting system.
They are accurate, the best carry out an integrated soft credit search and the process allows a broker to factfind, as well select and quote a loan in just five minutes while having a high level of confidence in the accuracy of the decision. The new generation of secured loan systems and integrations are very well placed to bring tangible and wide-ranging benefits to brokers.
Reluctance
Intermediaries have shown some reluctance in the past when it came to selling loans – probably rightly so as some questionable practices have been prevalent in the past. However, the sale of the product itself can now be shown to support ‘Treating Customers Fairly’ and offering best advice. This has been complemented by advances in technology that has lessened the difficulty of accessing these products and the ability to introduce these new products with confidence given compliance is built into the process. Additionally, by leveraging the familiarity of processes and procedures within programs they are already using, intermediaries will be more comfortable to make a secured loan recommendation. And with secured loans accounting for 11.2 per cent of the total mortgage market, brokers can confidently mine a new revenue stream.
Any brokers thinking of entering the sector for the first time have much to gain by linking up with a master broker. These firms have an unrivalled understanding of the market and can provide hands-on support. Make sure that you partner with a firm that can demonstrate that it has invested heavily in state-of-the-art technology to enhance their propositions, and will continue to invest, going forward. But beware, many systems on offer provide little more than an indicative quote, leading to customer dissatisfaction when they have to be switch sold to another product later in the process.
Master brokers offer new brokers in the secured market a ready-made path to the sector’s best opportunities. And it is an opportunity that should be grasped as quickly as possible. For who better than a broker that enjoys a close customer relationship to explain the benefits of secured loans as we move into an era of increasing interest rates with the inherent difficulties that brings for an already indebted population. Mortgage intermediaries represent one of the largest potential distribution channels for secured loans. Strangely, some intermediaries still remain reluctant to tap into the sector. Brokers need to bite the bullet. They must implement the correct technology to remain competitive and offer good service. With the advent of secured loan underwriting systems, as well as processing software that can support multiple lending, there’s never been a better time for brokers to buy into the software generation.
Meeting clients’ needs
Most brokers prefer to maintain their relationship with clients and control of the sales process to ensure they are best meeting their clients’ needs. In the past this has been difficult to achieve, as either the underwriting process was too cumbersome and slow or loan brokers simply offered a service whereby they took over the entire sales process and removed control from the introducing broker. With today’s sophisticated software, that excuse no longer holds any water.
Undoubtedly, there are elements within the secured loan process which require specialist knowledge but, provided that the relevant information is made available, selling a secured loan is very simple. New technology makes the sales process even faster and much simpler and provides the vital information immediately. The whole exercise of sourcing and selling a loan, including data capture, plus submitting the application for processing, can be completed in less than five minutes through free, instant, accurate, online secured loan underwriting together with a loan fulfilment process. This giant leap enables the intermediary to close the sale immediately and provide a previously unimaginable service to their clients.
Central to such a proposition is the free integrated ‘soft’ credit search. This is applied across all lenders criteria and supports the decision process leading to a high degree of accuracy. Any decision-in-principle without a search being undertaken has little value. Additional features of the new software include a panel of lenders that represent the whole of market and 24 hour case-tracking and sales support to help brokers build their secured loan business. By giving the broker more control of the sales process, internal costs reduce for the master broker, allowing most of the fees and commission to be paid to the introducing broker. Furthermore during the sourcing process brokers can control the fee charged and the commission they earn prior to submitting an application. At a push of a button, all subsequent loan processing and client liaison will be undertaken, leaving the broker free to concentrate on their core business.
The serious players in the market will be the ones that set the standards against which less committed or poorly organised operations will fail. Brokers need consistency, because their customers demand consistency. Both brokers and lenders need to remember that technology should be a service enabler, not a replacement. Technology can add value to service, but good all-round customer service will always be the cornerstone of any adviser proposition.
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