The dual approach to better service

Giving brokers the speed of an online decision backed up with the personal touch of an underwriter should be the way ahead for the specialist lending sector, says Roger Taylor

Cascade underwriting is a hot topic. To do or not to do, that is the question, and there is plenty of industry support for each side of the argument.

One recent launch of a cascade service for a mainstream and specialist lending product range announced that it was a one-stop shop for intermediaries.

At first glance this might seem like a good idea, but should a lender be promoting their service as a one-stop shop when one of an intermediary’s most important functions is to search the market for the best products to meet the needs of individual customers?

The obvious concern about automated cascade underwriting is that it is important the change in the product being offered is clear toan intermediary, and the broker doesn’t just take it for granted that the new product is definitely the best one for a customer.

In researching the product that was originally applied for, the broker decidedit was the best fit on the market for their customer’s needs.It has to be established that this is still the case.

For example, aparticular lender’sextra light product might appear to be the bestproduct for the customer, but if the application isautomatically cascaded toa light product, it doesn’tnecessarily follow that the same lender’s light productwill turn out to bethe next most suitableproduct on the market for that situation.

Sourcing the case again is undoubtedly going to cause the intermediary some frustration given that they have already spent time and energy sourcing and packaging it for the initial application.

But there is no denying that the case must be sourced again to satisfy the intermediary’s requirements that the new product is still the best possible choice for the needs of that particular customer.

Indeed, if the customer is kept in the communication loop and understands why it is taking additional time to find the most suitable product, they will be sure to thank you for making every effort to meet their needs.

We don’t employ cascade underwritingin the technical sense, but ifa productapplied for doesn’t fita customer’s circumstances, wewill enter into a dialogue with the broker to discuss the options.

For example, if an application comes in for a product butour underwriter determines that it doesn’t fit the criteria, they will contact the broker to discuss the case and together decide which product best suits the customer’s situation, making full use of the broker’s knowledge and experience as well as that of the underwriter.

Every case is individually underwritten and all our underwriters are intermediary-facing. It is an interactive process from start to finish.

The rise of automatic cascade underwriting is just one example of the way technology has affected the intermediary-lender relationship. While there is no denying that technology is an important tool and can have a positive effect on efficiency, it is essential lenders continue to keep channels of personal communication open.

It is also important to remember how and why the specialist lending sector came into being. Specialist lending developed because a new breed of lenders were willing to consider the cases mainstream lenders turned down, looking at each application on its own merits rather than relying on credit scoring.

The specialist sector is showing signs of a divide between the lenders that are becoming increasingly focussed on technology and automatic processing (not dissimilar to the approach of mainstream lenders), and those that continue to follow the traditional specialist path of considering each case on its merits.

In the first instance, technology and speed are the prime motivators but the personal touch suffers as a result. Too many people allow automation to determine their business strategy. As a result they lose touch with the fact that this is a people-focussed industry.

In contrast, relationships are at the heart of the traditional approach, with a flexible outlook, cases being reviewed on an individual basis and, in some cases, direct access to underwriters. Open dialogue and the art of negotiation are key, and having the personal approach does not necessarily affect levels of efficiency. The use of on-site underwriters takes this hands-on approach one step further. Who needs an automatic response that may result in a second round of sourcing and packaging when an underwriter based in the same office can discuss the intricacies of the case in person, make a decision and turn it around on the same day?

Lenders should heed the situation created by the banking industry in the past few years. By closing branches and generally making it harder for customers to speak directly to an adviser, many banks are now lacking the personal approach they once so keenly promoted. The outcome of this is that the majority of customers are unhappy with service levels. And unhappy customers tend to vote with their feet.

So what does the future hold, given the mortgage industry’s increasingly close relationship with technology and automated processing? Ideally, lenders will offer a dual solution – first class technology coupled with first class personal service.

Currently, lenders appear to be focussing on one or the other, resulting in the division that is now appearing in the specialist sector. Imagine a lender who can offer both systems so intermediaries can benefit from the speed of an online decision backed up with access to an underwriter who can individually assess any case that doesn’t proceed automatically. This duality is, in my opinion, the future of the specialist lending sector, and it is an ideal we are already working towards.

Quality must come before speed
The popularity of automatic cascade underwriting has grown in tandem with the increasing use of technology in the industry. High-speed decisions are all the rage, but speed should come second to making the best product decisions and providing good levels of service. The obvious disadvantage to automatic cascading is that it is just that – automatic. It doesn’t allow for flexibility or offer room for common sense decision-making by a person.

No matter how advanced it is, a program designed to cascade an application must work within predefined parameters, whereas if you have human intervention and checks in place in the form of an underwriter, they can use their experience and knowledge to make sensible commercial decisions according to agreed guidelines.

This can only be of benefit to the intermediary and the customer.