This article is prompted by the Star Letter (Mortgage Strategy September 5) from Gary Williams of MAST Financial Consultancy. With the headline of “It’s time for a sourcing system that offers recompense for mistakes” I feel it is indeed time to return to this contentious subject.The letter talked about mortgage sourcing systems and urged them to take responsibility for errors in the mortgage Key Facts Illustration that cause material loss to the client or to the broker. I last touched on this in my column of May 2, since when there have been repeated mentions of the subject in the trade press. In Mortgage Strategy August 15, the Vox Pop column attracted a few notable comments which I have paraphrased in the box. I totally agree with the comments of Mike Fitzgerald and Mike Carpenter. Having maintained lenders’ criteria on the mortgageLink sourcing system for nearly 20 years, at Network Data we have first hand experience of the sheer impossibility of getting all the data correct all of the time. Factors such as human error and poor quality communications with some lenders will always mean some errors creep into the data. Ifonline, which operates the Trigold system, proved conclusively some years ago that it could not rely on lenders to update their own criteria on Trigold and quietly dropped this method of working. All sourcing systems now operate a team of people that receive emails, post and telephone calls from the lenders and then key the information into their respective systems. Errors will arise. The responsibility of the operators of the sourcing systems is to reduce these errors to a minimum. Roy New no doubt voices the opinion of the majority of mortgage brokers. Harry Katz is right and wrong. Right in that if you are using a free online sourcing system, can you really complain if the information is wrong? But wrong when he says when you pay for a system you should expect the information to be correct. That would surely depend on how much you pay for the system. For Trigold and Mortgage Brain the going rate for an independent broker is 15 to 25 per month, or under 10 per month per copy for corporate clients. If you are paying over 25 per month you should insist on a reduction. Say you are paying 20 per month, or 240 per year. What do you expect for that sort of money? For that trivial amount you get a vital tool to provide advice to your clients, comprehensive mortgage criteria that is refreshed daily, a client management system and back-up facilities. Don’t forget that the 240 per year is revenue, not profit, out of which the operators have to pay the running costs of their businesses. Yet brokers continue to gripe that sourcing systems should also pay out when the data is incorrect. Read my lips, it is not going to happen. Not unless the monthly subscription charges are vastly increased to more realistic levels. Consider typical examples of inaccuracies in mortgage criteria. A product shows a refund of valuation fee while the reality is that the offer is only available to first-time buyers. The second-time buyer not surprisingly expects a refund of his 270 paid for the valuation or survey. A product shows a 500 cashback when there isn’t one. The client wants his 500. If the sourcing systems paid out, it would amount to one or two years’ revenue! There is one sourcing system that does provide recompense and that is mortgageLink. However, this measure of accountability is solely reserved for the appointed representatives of Network Data. A recent complaint to Network Data concerned a Portman mortgage KFI produced by the mortgageLink system. The inaccuracy, which we readily admitted, concerned the mortgage rate shown after the initial two-year discount period. This was lower than the true figure shown on the KFI produced by Portman at mortgage offer stage. There was no immediate material loss to the client, and in two years time the actual mortgage rate could conceivably be lower than that shown on the mortgageLink KFI. What was the loss to the client? During discussions with the client, he indicated that if we refunded his 370 valuation fee the matter would be closed. Against my better judgement but on the advice of our head of compliance, this is what we did. Such costs of recompense are absorbed by Network Data and form only part of the picture of running a large network. This luxury may be unaffordable to some smaller networks, and is certainly so the other sourcing systems, as I have indicated above. So what hope is there for brokers? There are been a vast amount of spin about product accuracy, verification by the lenders, Mortgage Brain’s traffic light system and so on. Most of this has little substance. The verification process, where it exists at all, is little more than an extra assurance by lenders that they have checked their own criteria on the likes of Brain or Trigold. But if the data turns out to be incorrect, are the lenders going to pay up? No chance. What hope is there? Well, there’s no sign of the cavalry riding to brokers’ rescue at the time of writing.
What the pundits say about KFIs
Should sourcing systems be responsible for KFIs?
Mike Fitzgerald, Brentchase Financial Services
Sourcing systems should guarantee the information they provide but I don’t envisage a day when they will be 100% accurate.
Mike Carpenter, Diamiqe Financial Services
With the best will in the world, sourcing systems will never be entirely up-to-date because of the sheer volume of information they contain.
Harry Katz, Norwest Consultants
It is important to establish the difference between sourcing systems that are paid for and ones that are available free. If they are free, it cannot be expected that all data will be accurate but if intermediaries are paying to use a service they have the right to expect it to be correct.
Roy New, sole broker
Sourcing systems should be responsible.