Secured loans have become an attractive option to consumers seeking to refinance or benefit from the rise in personal equity as a result of increases in property values over the past few years. Regulation is driving mortgage intermediaries to consider secured loans as an option for clients with a short-term need for finance for such things as home improvements, car loans or debt consolidation, because a remortgage over 25 years might not be the right product for the client.
Because of regulatory pressures intermediaries need to provide clients with the most appropriate product from a range. And although secured loans are not regulated, mortgage brokers have a duty of care and must treat their customers fairly.
The average broker uses sourcing systems such as Trigold and Mortgage Brain to source mortgage products, show adherence to best advice and record their selection process. But as yet there is no secured loan sourcing system that delivers the same functionality.
“Without an automated credit check system to verify adverse history it is difficult to select the appropriate secured loan for adverse borrowers”The problem is even more difficult for borrowers with an adverse credit history, as criteria for these loans differ widely and without a system that does an automated credit check to verify adverse history it is difficult to select the appropriate loan.
Most adverse clients do not know their credit history or how important this is in selecting the most appropriate product. The mortgage industry therefore needs a secured loan sourcing and underwriting system that gives the market access to a range of products and an agreement in principle.
Recently I reviewed a system called CALMS that could offer an online solution. It was built by Freedom Finance for its own use but the firm has also offered the facility to Money Expert. The system provides access to a range of secured and unsecured products and gives an AIP on all products in the system within minutes, after taking an external credit check online.
The CALMS technology runs on PCs with standardised Microsoft software. The core processing system is based on a JAVA platform, interfacing with an enterprise-level Microsoft SQL Server database. The technology appears robust and enables the front-end client application to transmit XML data securely to a central application server, which provides a credit data interface to an external credit agency and a bridge to back-end processing.
So far, the CALMS system has data from iGroup, First National, First Plus, Money Partners, Blemain, London Mortgage Company, Nemo, EPF, Citifinancial and Black Horse and more lenders could be added.
The system takes an automated credit search as well as running the data through the lender’s product matrix and has access to an automated valuation model which could speed the process even more if needed. At the moment, the AVM is taken during the case processing but could be done online to give instant decisions on some products. A full valuation can also be taken. Freedom can also undertake the packaging of the case to completion for the packager or broker.
Frank Eve is managing director of Frank Eve Consulting