But when it comes to the mortgage world, we have to acknowledge that they are ahead of us in many areas. Realising the important role that greater standardisation can play is one lesson we should learn.Standardisation could be applied to various aspects of our own mortgage industry, bringing significant gains in efficiency and transparency. These gains would benefit borrowers, lenders, brokers and investors. In the US, organisations have been set up specifically to agree on recognised standards. Freddie Mac and Fannie Mae, government sponsored organisations that operate in the secondary market, often help to drive standardisation throughout the industry. But lenders have also realised the benefits. For example, the Mortgage Industry Standards Maintenance Organisation is an outfit that was founded by mortgage lenders to agree on electronic commerce standards, allowing for far greater technological innovation. The higher degree of standardisation in the US allows its primary and secondary mortgage markets to run more efficiently. This standardisation has resulted in recognised definitions of mortgage terms, standard mortgage documentation and underwriting procedures, and an accepted set of information requirements on borrowers and properties. Also, technological elements such as file-format structures have become accepted by most. This has improved information gathering and eased the way for market players to interact. For example, dealings between brokers and lenders would become far more efficient in this country if a recognised set of documentation and information requirements could be agreed upon. In particular, with the right software, brokers would only have to key in information about the borrower once in order to make electronic applications to a range of lenders. Crucially, standardisation in the US has allowed for the greater automation of mortgage processes and a more widespread use of technology. Through the extensive use of specialist software, automated underwriting has enabled lenders to cut the time and cost needed to approve and close loans. And the servicing of loans has benefited too. The improvements in efficiency from such innovations over here would be considerable. A higher degree of standardisation could also have advantages in the secondary market. The setting of recognised norms in terms of portfolio definitions and information requirements would make risk assessment quicker and easier. And the trading of portfolios between companies could be made significantly easier. Instead of whole loan transactions taking weeks or even months, they could take place in hours or minutes. Standardisation has an image problem with some in our market. It can be crudely associated with over-regulation, lack of diversity and product commoditisation. But a look at the US shows this to be unfair. Standardisation is occurring slowly in some areas of the British mortgage industry, helped by lender and government action, but it should be coming along a lot quicker. This is one American lesson we could all benefit from learning.
- Top trends
Ian Nelson, chairman of the Professional Mortgage Packagers Alliance, has today set out to dispel rumours that the packager collective is on the verge of meltdown.
The dramatic shift in homebuilders constructing flats rather than houses has contributed to a continued downturn in the new homes market as average prices across the UK are down 4.8% on the same time last year, reveals monthly data from SmartNewHomes.com.While houses rather than apartments are more popular with home buyers, government restraints on homebuilders […]
SHIP has welcomed the news that the government has taken another step towards the introduction of formal regulation for home reversion schemes. The third reading of the bill has been completed and means royal assent could be granted by the end of the year, enabling an acceleration of the consultation process. The final consultation process […]
Solent Mortgage Services has launched a direct-to-lender mortgage club, 1st Source Direct. The facility gives SMS brokers access to 56 lenders as well as a number of exclusive products.It marks a shift in the emphasis SMS places on lender choice as well as offering more submission options to its supporting brokers. Brokers now have access […]
Research by insurer LV= suggests that some 11 million employees in the UK have no company-paid sick leave entitlement. So if an employee from within the above grouping cannot work through illness or injury for any period of time, their only income would likely be that provided by state benefits alone.
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