The latest advertorial, entitled ‘The truth about credit quality’, prompted my good friend Stephen Knight to write a letter to the magazine (Mortgage Strategy March 3).
Knight was the most obvious candidate to put his oar in, having been such a convincing advocate of automation while at GMAC-RFC.
In his letter, Knight states: “Without corroboration, Snowdon’s words seem more like a sales pitch by a lender without technology than an exposition of the truth.”
If only it was a sales pitch. In reality, the advertorial was not designed to defend manual underwriting against automation.
In it, I readily concede that technology is here to stay. My point is more that it’s self-evident that credit quality was worse during the recent boom years than it is today or was prior to the good times.
Another point I make in the ad is that prior to the liquidity crisis, up to 40% of funding came from investors rather than retail savings.
Unfortunately, these investors have now largely fled the market. If we are to encourage them to open their wallets once more, our focus has to be on credit quality – we must have a compelling story to tell them.
They are now more likely to want to go through files in detail and to better understand the rationale behind lending decisions.
When Knight launches Checkmate, he may be able to satisfy investors in these terms by taking a fully automated approach.
But my everyday experience is that funders are taking a great deal of comfort from human intervention.
At the moment, I believe the most important challenge for lenders, and particularly specialist ones, is to get the correct balance between technology and the human touch to give comfort to investors.
As I point out in the advertorial, this is the new Holy Grail if the special-ist sector is to move forward once more.