Technology always seems to be moving at a million miles an hour and the battle for the developers is always to remain one step ahead and provide the latest must-have gadget. But while some technological advances may only have a luxury use, there are some things which have become mainstays for everyone concerned.
Take the mortgage sourcing system as an example. With the increasing complexity of the mortgage market, with thousands of products from a huge number of lenders, technology has made sure brokers can keep a toehold by giving them a tool which helps them trawl through all the different criteria and options. It could even be argued quite strongly that if it wasn’t for sourcing systems, the market would be nowhere near the level it currently resides.
But as with anything in a cut-throat marketplace, especially when it comes to technology, you cannot afford to rest on your laurels and there are many out there who are starting to question whether sourcing systems are being left behind.
Ian McKenna, director at Financial Technology Research Centre, says: “Sourcing systems are at best a guide now and what this industry requires is a system that meets the needs of the 21st century. In an increased regulatory environment, the standard for systems has changed and they are just not keeping up with the needs of brokers and lenders in the long-term.”
Long-term needs
So what will it take to create a system which is capable of meeting these long-term needs and, with the pace of change currently sweeping the industry, is it really possible to construct a system which is 100 per cent trusted by brokers, lenders and
the regulator?
As Richard Angliss, managing director of Homebuyer Systems, points out: “People flog sourcing systems over accuracy of information but really the only people who understand all the product details are the lenders who create them. Plus, we get all our information in bulk from sources like Defaqto and, however hard you try, there is always going to be an element of human error.”
So how can this problem be rectified? As Mark Lofthouse, CEO of Mortgage Brain, insists, despite having over 40,000 products a day on the system, the number of complaints a year over accuracy number in the 10s. But with brokers using sourcing systems as an initial stage in getting the best deal for the customer, is there a way of reducing this to zero?
The ball is very much in the lenders’ court on this, as McKenna explains: “Sourcing systems need to communicate directly with the lender’s affordability calculator but lenders are worried that the system could push the envelope and get more on the calculation than they want. Also, some lenders like the way the systems are now, with brokers locked into a cascading system.”
Many people point to the Origo initiative as the way forward on this, by creating a single application document which bounces off lenders’ affordability calculators and comes back with the right deal for the client.
As Angliss explains: “I can understand why lenders don’t give us the affordability calculations but if we had the information, it would make the systems much simpler. However, Origo is doing great work and sourcing systems will only get better and more accurate when it comes in. In this day and age, Origo will be the only viable way forward.”
Slow
But Origo has been slow to get off the ground and has yet to achieve the unanimous backing of the lending community. Some of its features though are already here, according to Bill Safran, CEO of Trigold. For him, the systems have gone past just being tools for sourcing products.
“It’s not just about products as a sourcing system also needs to provide the documents and the access to lender systems which brokers need to do their jobs.”
This increased access will be vital in what many see as the next stage of development among lenders; the creation and pricing of products as dictated by individual risk.
As Stewart Hunter, head of intermediary business at Astra Mortgages, explains: “Lenders are changing, on the back of Basel II, towards pricing on individual risk. This will create wider ranges and different levels of product, meaning lenders could have 100 very similar products. You can see that there is a struggle to cope already so going forward, brokers will have to get an idea of the product they want from the system and go directly via the lender.”
This shear level of product choice will only add to the complexity of the marketplace. However, Lofthouse insists systems will be able to cope as there is already very thin banding and individual underwriting in the adverse market.
“It’s a great theory but I can’t see how it’ll happen in the mass market. It does already happen to a certain extent with adverse, where if you are on the margin, the lender will often bend the rules. But to say sourcing systems will not be able to cope is inaccurate.”
So can the technology keep up with the mortgage market? As Safran says: “It’s a highly competitive market and if we don’t provide what our customers want, others will.” Therefore, it’s now up to the sourcing systems to step up to the plate and retain their worth to a high-demanding industry which needs the right tools to get the job done.
