TowerGroup and Frank Eve Consulting Limited announced the completion of the “2003 Mortgage Lenders’ Intermediary Web sites Benchmark Study,” the second annual study of how UK mortgage lenders use Internet technology to automate the intermediary lending channel. Its major findings are real-time, Web-based technology has become indispensable for lenders to efficiently manage mortgage intermediary (mortgage broker) relationships, and for intermediaries to adapt to new Financial Services Authority (FSA) regulation in 2004.
This is the only survey that analyzes how mortgage lenders and intermediaries use Internet technology to speed the lending process for intermediaries and their consumer clients, and it is the first to compare UK wholesale lending best practices with wholesale mortgage lending in the United States. This year’s twelve study participants, which account for approximately 75% of all UK intermediary lending, included a larger number of building societies and specialist lenders compared to the 2002 Study. The study found that about half of all intermediary lending is now conducted online and that online intermediary lending accounts for 19% of total UK gross mortgage lending.
“Real-time (60 seconds) agreement in principal (AIP) loan approval is a mission-critical best practice that separates the leading lenders from others. This technology is available at only a few lenders and has become a key competitive differentiator,” said Frank Eve, Frank Eve Consulting Limited managing director. “A lender’s abilities to pre-populate the online loan application from mortgage sourcing systems and track loan case status online are also critical functionality that reduces intermediary and lender operating costs and completes the loan faster for the mortgage applicant,” Eve added. “Lenders would not have been able to effectively process the dramatically larger gross lending volumes, which grew at a 35% annual rate the past two years, without this technology.”
The study also examined the growing role of mortgage trading platforms in UK mortgage lending and compared technology best practices between UK and US intermediary Web sites.
“The leading UK trading platforms, Mortgage Brain and Trigold, have a growing number intermediary clients using their mortgage sourcing software and trading platforms to source loans and select loan programs from multiple lenders,” said Craig Focardi, TowerGroup senior analyst for mortgage lending. “We found that in addition to sending loan product and rate information to intermediaries through these platforms, the leading lenders in our study are also building system integrations to receive online loan applications through the platforms to improved operational efficiency by reducing data rekeying and errors.”
The Study also compared best practices between UK intermediary Web sites and US wholesale lending Web sites for mortgage brokers. “The UK and US mortgage markets are converging in many respects. UK lenders provide leading technology for automated AIPs, but are moving toward the US model of online decision in principle (online mortgage offer) functionality. Industry-standard loan documents and investor automated underwriting systems have helped US lenders to quickly bring their mortgage broker customers and lending processes online,” added Craig Focardi. “Despite the lack of loan document standardization, UK intermediary Web site technology has advanced rapidly. The standardization brought about by FSA regulation will further spurt online intermediary lending in 2004.”
The Study is expected to assist lenders and the software vendors that serve them with critical information to plan and prioritize IT spending for Web site enhancement. “With total intermediary lending (mortgage intermediaries and independent financial advisors) now accounting for approximately 47% of total mortgage lending, lenders need to know what functionality provides the best return on investment (ROI) and increases Web site usage amongst intermediaries, and we believe that this Study provides that information to the mortgage marketplace,” said Frank Eve.
The full report is available to non-participant lenders, software companies and other interested parties for £1,500. Firms interested in purchasing a copy of the survey should contact Frank Eve Consulting Ltd. at [email protected] or TowerGroup at [email protected].
