In a speech given at the Social Market Foundation Conference promoting responsible lending, Knight willed policymakers, opinion formers and lenders to be on the same page when it came to consumer protection and modern underwriting.
As part of the address, Knight revealed statistics, which demonstrated how automated underwriting was producing better arrears and complaints statistics, and therefore providing better protection.
He said traditional approaches to mortgage underwriting, still practiced by some lenders, let customers down very badly, particularly in the recession of the early 1990s.
He said: “For as many instances where the so-called underwriting instincts of a branch manager has made the right decision with a particular application, there are twice as many where human error, and the vulnerability of humans to influence and leverage has produced the wrong decision.”
He added: “The lending industry – save for a few stragglers – has moved on and we need public policy makers to move on with us.”
Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “I’m sure there is evidence that system-based underwriting does make for better results when it comes to arrears and repossessions cases.
“That said, for the odd case, information may not be validated on an automated system and it’s necessary to talk to an underwriter and relate the individual circumstances. Incorrect data can be captured by automated systems, so it is important to have the ability to talk to lenders with score cards and automated systems in place.”
