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Are the main sourcing systems flawed when it comes to sub-prime products?

Our experts are split, with one arguing systems are well suited to the specialist market and the other saying their technology can’t cope

Mark Lofthouse is chief executive of Mortgage Brain

The answer to this question is no. Despite what critics claim, when used to complement the knowledge and skills of introducers, sourcing systems are ideally suited to the specialist market.

Leading sourcing systems have adapted to meet the changing needs of the market and significant developments have taken place during the past year or so to ensure brokers can use them to efficiently source specialist products.

Market coverage and product availability are two of the big issues. Unlike some systems, Mortgage Brain provides whole of market coverage for sub-prime products comprising all 46 lenders whose products have adverse components as well as packagers.

Between 35,000 and 40,000 mortgage schemes are displayed on the system – up from 5,000 five years ago – with about 75% of these being adverse. It’s puzzling when critics claim that product choice and availability are problems with sourcing systems as the facts clearly demonstrate this is not the case.

What is also puzzling is the number of people commenting on sourcing systems who are not up-to-date with what these systems can do. This does a disservice to the industry. The things brokers think sourcing systems cannot do – in particular, support the adverse and buy-to-let markets – are in fact in place.

Recent advances in technology have made product filtering and selection for adverse and buy-to-let products better than ever but brokers can’t expect sourcing systems to do their jobs for them.

The purpose of sourcing systems is to make brokers’ jobs easier and they do this when they are used properly and to their full potential. However, they are not intended to replace quality advice.

Kevin Friend is strategic partnership director at Evaluate Technologies

Yes. And this was also the opinion of the lenders, brokers and packagers that attended Mortgage Strategy’s recent Mortgage Packager Summit in Nice.

Will sourcing systems ever offer a solution? To find the answer, you need to look at the technologies on which they are built. These would not be the preferred technologies if they were starting now. Systems’ technology and business models have developed organically, with changes to one having a huge impact on the other. But changes in the market have also been significant, so short of starting again, sourcing systems will not be able to come up with solutions.

Why are they flawed? Sourcing systems are poor at handling non-standard criteria, affordability-based lending models, shared equity products and more importantly, issues with credit scoring-based lending and clients with historic credit problems.

Database management, the accuracy of data and product changes often lead to out-of-date and inaccurate results being gleaned from searches. One example of this benefited a sub-prime lender whose products ranked top, not on merit but as a result of the inadequacy of the system involved.

Brokers want speed, accuracy and certainty. The success of GMAC-RFC and BM Solutions in sub-prime lending shows these things are crucial.

Brokers have few options. They can search a single lender and rely on a cascade or use multiple lenders and keep records of each result. Or they can use packagers – and this is where technological innovation will win, exploiting the space left by sourcing systems that fail to deliver reliable solutions.

Rates and criteria are becoming more competitive so why should lenders have to model their products to suit sourcing systems?


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