By Matthew Tooth, Chief Commercial Officer, LendInvest
One area of the mortgage market that doesn’t get the attention it deserves is servicing. Bringing a borrower in the front door is only the first step; actually servicing that loan properly is not so visible, but just as important to a lender’s bottom line.
Earlier this year LendInvest received the highest possible rating for the quality of our loan servicing from ARC Rating, a regulated European credit agency, for the third straight year. It’s a big achievement for any lender, but particularly an online lender.
For some time there has been a misconception that online lenders are radically different beasts from our high-street counterparts, playing fast and loose with money. Receiving such a high rating adds credibility to our business, demonstrating that we understand the fundamentals of proper mortgage lending and are building from that base, rather than promising an overnight revolution that is realistically not going to happen.
In many ways, borrowers and brokers notice servicing only when something goes wrong, failing to meet a borrower’s expectations or to address their concerns. But it is a fundamental part of any lending business, so getting it right is essential.
But what actually constitutes quality servicing? Here are some of the things that ARC looks for when rating a lender’s servicing standards:
Corporate governance and structure — Quality servicing starts at the top, with importance placed on the transparency, systems and controls put in place. That means a management team engaged with what you are doing, regularly reviewing process. In a market that moves as quickly as short-term property loans, this is vital.
Due diligence — The way in which a potential borrower is assessed is of course enormously important for any lender, and that’s reflected in the rating process. The speed and efficiency of adding that new case to your system is central too.
Internal controls — There is more to being a lender than handing over the cash and hoping for it all to be paid off on time. Quality lenders are on the ball, regularly reviewing case files and how a borrower is performing, taking a proactive approach if concerns present themselves.
Industry-standard technology — Unsurprisingly, this is a big one for us. The days of relying on pen and paper are long gone; today lenders need to demonstrate that they are using technology efficiently to ensure the highest standards of service.
Data backup — How good firms are at protecting their customers’ data has been a topic of frenzied debate in recent years, with a host of hacks and data leaks putting innocent people at risk of fraud. Quite rightly, rating agencies put a big emphasis on just how vigorously that data is stored, and whether the processes in place will scale with company growth.
Financial condition — Finally, there’s the overall financial position of a firm. Can it regularly turn a profit? Does it have a sound financial base on which to build?
Building a quality servicing proposition does not happen overnight. Yes, we are a lender that is keen to adopt greater use of technology, but the foundations of a good servicing process lie in the people you employ. You need quality underwriters, who understand the very DNA of your proposition and the clients you are dealing with. You need experienced heads leading the team, people who have seen how the market operates in both good and bad times and so are better prepared to deal with the many hurdles and hiccups that present themselves along the way.
This is an exciting time for the bridging market, with so many new lenders emerging and exciting, innovative products being launched. But we know from the brokers we deal with every day that there is a lot more that goes into picking a lender than simply the rate on offer.
Lenders that deliver a more rounded, comprehensive service, from the initial offer until the day the loan is closed, are the ones that will continue to thrive for the long term.