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Fit for purpose

This week it’s lenders’ turn to reveal how brokers could improve their business. It’s the quality of applications that causes the most grief and the devil’s often in the detail

Last week we looked at what ticked off brokers about lenders and what they could do to improve. This week the tables have been turned as lenders tell brokers how they can submit better applications and stop unnecessary delays.

The primary barriers are caused by a lack of documents, missing data and misunderstanding the underwriting processes.

When asking around the industry for how brokers could improve, one lender remarked that the best brokers think like underwriters when submitting applications. By doing this they can predict where issues may arise and iron out any snags pre-application. But thinking like an underwriter is easier said than done if you have no direct experience of how lenders work.

We spoke to a range of lenders to discover what brokers can do to shape up and improve the quality of business they submit.

It’s all in the detail

The primary reason for delayed mortgage applications is inaccurate information from borrowers. This can range from something as simple as the wrong age or address, to more complex issues like designating someone as self-employed when they are actually a sole trader.

Industry consultant Mehrdad Yousefi says missing or inaccurate data has been a problem for years.

“The usual difficulty is when there are details missing from an application such as postal address, employment details or even solicitor details,” he says. “The worst is when there is no contact number and the valuer cannot get in touch to arrange a visit. This means lenders have to contact brokers which can delay the application. Mostly these details are left out by borrowers and not brokers, but it can still hold up the process.”

And the consequences of your clients or you inputting the wrong address can be major. Chris Magg, divisional manager for southern BDMs at Accord Mortgages, points out that inaccurate data can affect clients’ credit scores and lead to unnecessary declines.

“It is often small details that brokers don’t think are important that can affect the credit score and clients could end up facing a decline,” he says. “A lack of complete address details, especially for flats, are a common error and can result in low credit scoring as it appears borrowers are not on the electoral roll.”

A spokesman for Coventry Building Society says one common error is when applicants are called self-employed because they are a director in a company but actually are sole traders.

“It means we will ask for the wrong information which can cause delays,” he says.

David Kreeger, director at bridging lender West One Loans, says obtaining concise, accurate data is the biggest challenge for lenders.
“The more fully filled out applications are, the fewer surprises there will be and the quicker we can process it,” he says.

Hitting the bullseye

And if you think the amount of information that needs to be produced now is tough, things are set to get even worse under the Mortgage Market Review.

Yousefi says that when the MMR is introduced every income will need verification, meaning even more information will need to be supplied and be accurate. He says brokers usually manage around 50 clients with up to 12 applications being processed at any one time.

He predicts that between 10% and 20% of them will always have details missing. The core reason for a slip-up is that many brokers are busy and if they’re doing it all themselves, the paperwork can seem like a chore.

But Richard Tugwell, intermediary business manager at Virgin Money, makes the point that it’s an important part of making the application process as smooth and as fast as possible.

“The clearer the submission is, the fewer questions we will have,” he says. “Accuracy is an important element as little things like spelling mistakes in addresses can slow things down.”

Colin Dale, head of lending at Skipton Building Society, urges brokers to make sure everything is accurate so there are no nasty surprises to cause delays.

“Some brokers are getting good at it and some distributors have their own packaging systems to gather as much information as possible,” he says. “Times have moved on since 2007 when everyone was chasing volume. Lenders are taking a more pro-active approach in getting case submissions through more quickly.”

Tugwell says that if he had to pick out one area for improvement it would be to receive fully completed applications.

“This includes all the supporting documentation upfront as well as talking to us if brokers are unsure what this means for their client,” he says. “We can process applications which include all the required documents faster, meaning quicker decisions.”

David Finlay, intermediary business director at Barclays, emphasises the use of its online systems and guidelines in putting together accurate case submissions.

“These stress the importance of inputting accurate information and list all the required supporting documentation for applications,” he says. “The key to a smoother process is to package all the required documents together and send them in one go.”

Document dramas

Brokers often complain that lenders ask for an endless stream of new documents after submission and decisions in principle but lenders say this is due to new information coming to their attention.

“The most common problem is that when we ask for documents they don’t always get sent,” says Magg. “Brokers think lenders just keep asking for more and more documents but that is because we find new information at a late stage and need more proof.”

Self-employed cases is one area where documents can get delayed more often than not so lenders advise brokers to be aware of potential difficulties.

Roger Morris, sales director at Precise Mortgages, says brokers are usually good at submitting documents but there are areas to be careful of.

“Lenders require three months’ bank statements but these days most people use online banking and don’t receive postal statements,” he says. “They have to go to the bank which can hold up applications.

“Also getting up-to-date accounts can be an issue, especially for the self-employed who often wait as long as possible before filing accounts. It is also worth noting that in January when accountants are busy dealing with tax assessments, many mortgage applications can be held up waiting for tax records to come through.”

Kreeger adds that cases can get held up just waiting for the odd document.

“Redemption statements, up-to-date mortgage statements and consent letters from existing borrowers can often cause delays,” he says. “They can take a day or more to arrive which is a long time in the bridging world.”

Poor packaging

Brad Fordham, sales director at Abbey for Intermediaries, says when it comes to packaging documents, it’s important to send in what the lender asks for – not more or less.

“Failure to provide straightforward information can hold up cases,” he says. “Some of the most common omissions we see relate to areas such as gifted deposits and details of residents over 17 years of age who aren’t an applicant on the mortgage.”

Magg says another common omission is payment of valuation and booking fees on time.

“Without payment we can’t conduct the valuation straight away,” he says. “Some brokers ask us to delay the valuation but if we get it done on the first day then the application can proceed more quickly.”

Dale points out that some brokers are not good at packaging applications, which creates headaches for lenders.

“Few applications are in a sufficiently good state to start processing immediately,” he says. “Lenders then have to chase information before the processing can begin. In the main applications are not good and that is disappointing because it is harder to get mortgages these days.

“If you have a situation where there are consistent inaccuracies then we may choose not to do business with that broker anymore.”

Refusing to do business with brokers who consistently submit poor applications is not a new phenomenon but it is something brokers should remain alert to. When Lloyds Banking Group hit the headlines in 2010 for removing a number of brokers from its panel, quality of submissions was often quoted as a reason for the action.

Ian Andrew, managing director for group intermediary sales at Nationwide, says that if the quality of submissions is consistently bad then Nationwide sends the application back to the broker for re-submission.

“If brokers consistently send in poor quality or incomplete applications we simply send them back,” he says. “Ultimately there comes a stage when we will stop working with them over the quality of applications.”

Rise of the robot

Many lenders are improving the way they receive documents now with paper applications an endangered species as they turn to email and scanned submissions.

“We do a lot of work electronically so brokers can scan data and send it to us so we can make decisions quickly,” says Dale.

Skipton is not the only lender to turn to electronic applications as a way of improving document-handling. Last year Abbey for Intermediaries began accepting scanned documents and Accord will accept them within the next month.

“It is better for brokers to email documents to us as there is less chance of them getting lost than if they are faxed or posted,” says Magg. “We will be introducing our electronic document service in the next month so brokers can scan documents. If they follow this route then applications can proceed quickly. Sometimes we will see things, such as school fees, that are not initially mentioned and that can cause issues.”

Nationwide also plans to go entirely electronic with applications.

“The main problem is the right documents not coming through and we have a disproportionate number of issues with paper applications,”
says Andrew. “We recently launched a partial electronic system, which has been successful and we hope to move to a fully automated system in the future.”

But some problems cannot be solved by scanning, as a spokesman for Coventry highlights.

“You’d be amazed at how often we receive photocopies of documents that are illegible,” he says.

Please sir, can I have some more?

The dilemma facing brokers is that they have an ever-changing roster of clients, all with different circumstances, and then have to negotiate the different systems of lenders. So are there any hard and fast rules they can adhere to?

All lenders want as much information as possible as soon as possible so they don’t have to ask for more if new issues arise later.
“Brokers should gather as much information as possible on clients for two reasons,” says Dale. “First, not every case ticks a box and sometimes it may seem like lenders can do a case but if something crops up they won’t be able to.

“Often information is not accurate – such as when the income is declared but takes account of bonuses or commissions. Other complications include borrowed deposits not being declared.”

So the more information they receive the more quickly they can process the application especially for high LTV cases.

“The worst situation is when everything seems fine with a case and then a snag arises over income or the applicant’s age,” says Dale. “When it is difficult to get mortgages brokers must prepare the ground better especially in the case of 90% or 95% LTV mortgages, for which lenders need more information.”

In the bridging sector, where speed is paramount, lenders ask for as much information as possible even if it isn’t used in the end.

Kreeger says the nature of bridging means lenders’ solicitors ask for everything so the application process can get under way.

“Speed is important so we get as much information as possible and if we don’t use it then that is fine,” he says. “Borrowers can also cause delays and sometimes it is the brokers who are in more of a hurry than their clients.”

Fordham says good packaging leads to quicker offers and brokers can make some simple improvements.

“Including all a client’s income is essential when assessing affordability, which is why our website provides a detailed calculator that is the same as the one used by our underwriters,” he says. “We advise our intermediary partners to use a payslip to get income deductions correct, include all income types on the calculator and then transfer this information to our introducer internet system, to ensure the borrower’s income is assessed correctly and the case processed faster.”

One tip from Coventry’s spokesman is to make sure all documentation and information is sent through at the same time as it can be difficult to piece together two parts of an application.

Too slow

Just as brokers find being unable to contact their BDM can frustrate the hell out of them, lenders too get annoyed if their calls and emails are not returned quickly.

When the right documents aren’t present lenders have little option but to badger the broker with requests.

For bridging loans this is even more crucial as a day’s delay can create significant problems.

Kreeger says prompt responses are crucial to fast loan offers and while some brokers are good others are slow to return emails.

“The borrowers’ solicitors tend to be where delays arise as they are not aware of how bridging solicitors operate,” he says.

“We don’t have many issues with brokers and it is often legal problems that can cause snags. Brokers can help us chase documents needed to complete the application but the main thing is to provide accurate, concise data so we can get cracking on the loan.”

Keep it real

One thing that can frustrate lenders is brokers submitting a case that has little chance of succeeding. Dale says brokers need to be realistic about what cases will get through and understand what lenders can and cannot do.

“We encourage brokers to use DIPs in the right way so they can see what cases will succeed,” he says. “If everything remains as it is in the DIP then we can get the case through. When you come to do the application you will have some commitment and know exactly what is required to get it through.”

Tugwell says brokers should avoid making assumptions about applications and clients.

“The DIP tells the intermediary what our requirements are for that case and this will not change unless the information on the application or the credit check differs,” he says.

“If they do not have all the information needed, they should ask whether what they have is sufficient. It saves time and avoids confusion in the long run.”

Dale also calls for realism over timescales and asks brokers to recognise some of the pressures facing lenders.

“In the current regulatory environment we have to do affordability checks, income verification and extra checks for interest-only mortgages,” he says.

But Tugwell adds that brokers specialise in offering their clients advice and managing them through the process.

“Setting client expectations is an important element of that and most of the brokers I deal with seem to be good at it,” he says. “As a lender we must always strive to ensure we provide intermediaries with the necessary information to allow them to do exactly this.”

Know your lender

There are also calls for brokers to familiarise themselves with lenders and areas they don’t normally deal with.

Different lenders and different types of lending will have alternative policies and requirements. For example, bridging loans is a sector used by some specialist brokers but there are others who use it on an irregular basis.

Kreeger says the types of brokers who want bridging loans range all the way from the experienced to those who use it rarely.

“Those brokers who do plenty of bridging loans know exactly what is required,” he says. “Then there are those who advise on a loan about once a year and maybe use a specialist packager or master broker. There are also some that rarely advise on bridging and we try to guide them through the process.

“It is not a problem for good brokers as it is not dissimilar from any commercial loan.”

It’s not just different types of loans that brokers need to look out for. Lenders can vary greatly with their policies too.

A small building society will have different processes to Lloyds Banking Group and will need to be dealt with differently.

Tugwell says brokers should make themselves familiar with specific lenders’ policies and requirements.

“It’s worth remembering that some brokers may deal with certain lenders intermittently,” he says. “If that is the case, I would encourage brokers to familiarise themselves with a specific lender’s policy and documentation requirements before submitting an application.

“This should help the turnaround time for the application. Most lenders make their policies and requirements accessible for brokers – the Northern Rock website includes a searchable policy to help make it as easy as possible and of course our team of BDMs is always available to answer any questions and help intermediaries through the process.”

Use your BDMs

BDMs are a broker’s best friend or their worst nightmare depending on how their case is progressing.

In the good old days pre-2007 BDMs were notorious for whispering to brokers the various loopholes that existed in their lender’s systems to get an application through.

One now-defunct lender apparently had a glitch in its system whereby brokers had three chances to input a client salary that stacked up for them to be able to afford the mortgage.

But if that still didn’t work all you needed to do was input the client’s details into the system again and you had another three chances to enter in a correct salary – and this was communicated to brokers by the lender’s BDMs.

Times have changed and in an era of stricter criteria BDMs have to work harder to do right by their brokers. Jumping through hoops rather than avoiding them is the name of the game in today’s mortgage market.

In that sense BDMs are more important than ever and can make an impact on whether a case succeeds.

Fordham says BDMs can be the difference between placing a case or not and brokers should take full advantage of them especially in a difficult market.

“We have one of the largest sales forces in the market and everyone works hard to add value to intermediaries by offering support on anything ranging from information on our lending policy and criteria, to discussing difficult cases and escalating problems,” he says.

Finlay says that brokers have access to Barclays’ relationship managers to help them with all aspects of the application.

“There are also two dedicated support teams which brokers can call directly, one of which focusses on policy and application support,” he says.
Coventry’s spokesman tells brokers not to be afraid of calling his team before submitting cases.

“Many applications are delayed when it is quite clear that brokers haven’t checked the website or spoken to us first,” he says.

Lenders can help

It’s not just BDMS who can come to brokers’ aid, as by using technology, which has come on leaps and bounds in the mortgage market, lenders claim to offer a range of services to help brokers submit applications more quickly and to a higher quality.

NatWest offers a LiveTALK service for pre-application issues that gives brokers online access to the lender.

But Dale says it is surprising how many brokers don’t take advantage of the systems and tools lenders offer to speed up applications.

“We have many systems such as case tracking and brokers can call me up on a direct number,” he says. “We have a transparent process and provide as much information as we can. It is about getting brokers to use some of the tools and educate them about how they can improve case handling.”

Fordham says technology in the industry has improved hugely in the last 12 months and argues that making full use of all the tools at their disposal can really help to make life easier for intermediaries.

“We introduced document upload functionality, a secondary email option, and extended case email updates last year, all of which have proved popular with intermediaries and transformed the way many brokers do business with us,” he says.

Finlay says it has a series of helpful accessories including a website, literature, regular email communications and a quarterly e-zine.
Broker tools include affordability calculators which are present on most lender websites these days.

“Lots of brokers still look at income multiples and ignore the affordability calculator at pre-application stage,” Finlay says. “They should be going through the affordability calculator and finding details of all income and expenditure.

“If the end result is that borrowers can access sufficient borrowing they can proceed to DIP stage. The main issue is that DIPs are not fully completed and that could affect the borrower’s credit score profile.”

Magg says that brokers are wasting their time if they don’t use the affordability calculator, as the Financial Services Authority wants lenders to offer mortgages based on affordability rather than income multiples.

Nationwide launched a phone application last year and says its take-up has been impressive with more than 600 downloads.

It is already available on Blackberry and Android phones and the lender is planning an iPhone app in the next couple of months.

Ultimately, it is simple things that cause the most trouble for lenders.

Dale says brokers need to improve their ability to assess what lenders want.

“The big networks are getting better at doing it but it is the brokers who we don’t deal with on a regular basis that can cause issues,” he says.

“We try to make it a two-way street. We try and extract as much information as possible but if the case is unusual brokers should speak to us.”

This is a similar message to that which came out of our feature last week on the issues brokers had with lenders. Clearly on both sides, actively communicating is the best way to build a happy relationship.

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  • HW 26th January 2012 at 8:59 am

    No real surprises in an article that states the obvious, although shortcomings in many providers appliication and systems, and affordability calculators are simply glossed over.

    Can I look forward to a balanced reply from brokers regarding lenders’ delay in processing due to lack of staff, inexperience, poor communication, and left hand never meeting right hand?

  • Henry Woodcock 24th January 2012 at 5:09 pm

    Lenders need to provide Intermediaries with intelligent automation in the sales and origination process that caters for grey cases as well as black and white and provide appropriate human intervention when required.
    There are a number of straightforward application strategies that can reduce wasted time and effort and failed applications.
    Address targeting early in the process cuts the number of referrals and fails.
    Simple changes in data capture to ensure only relevant information is captured once and is gated so that full mortgage applications are just that – fully filled out.
    Where documentary proofs are required, simple scan and attach options make it easy for the intermediary and if intelligently routed to the relevant originations teams reduces delay.
    Building in affordability in the main process rather than relying on the Intermediary using a stand-alone calculator means the Intermediary knows at that stage – well before FMA – that his/her client can afford to service the loan.
    Lastly as others have commented, communication is key and that means sales system need to communicate as well, in a conversational way, signposting the lenders process from initial enquiry to offer and onto completion.

  • Vlad 24th January 2012 at 10:52 am

    Apps are what is needed to make your smartphone smart and unique.Im fond of app creating and find it really helpful to use site like snappii.com where i can build apps in minutes.