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The evolution of the mortgage sourcing system

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Although technically mortgage sourcing systems have been around for almost 30 years (product data by post, anyone?) those of us with too much interest in these things tend to regard MDay as being a ‘ground zero’ for the technology.

On MDay, or Mortgage Day, 31 October 2004, the FSA (as it was then) introduced the most important and far-reaching clamp down on the mortgage industry ever seen. Sourcing systems, up till then viewed by some with suspicion, became the indispensable tool they are today.

MDay introduced not just the concept of regulation and authorisation, but also accuracy requirements, consistent documentation and processes. Initial disclosure documents were essential and KFIs were not only a must but they had to come from a reliable source and be within the FSA’s strict tolerance levels.

Many of these changes required technology and in the run up to MDay, there was much speculation about if or how sourcing systems would cope.  MDay was as much a challenge for mortgage software developers as it was for introducers. Fortunately the industry rose to the challenge.

Leading sourcing systems became capable of meeting the most stringent compliance needs and those that were integrated with point-of-sale and CRM systems were able to actively support the compliance process.

Having proved its worth during the MDay shake up, attention then turned to the question of accuracy.

Perceived lack of accuracy in these systems had always been one of the main concerns expressed by brokers and it needed to be addressed if the industry was to have confidence in them.

In response, technology companies came up with an array of checks. These included: ensuring that as a minimum requirement all data fed into the system was checked by the inputter and at least one other person: product data verification, where key items were checked by the lender; and KFI checking, where KFIs on sourcing systems were checked against those from the lender. The level of checks to which the information had been subjected was indicated to the broker. 

This increased level of accuracy is just one way in which sourcing systems have blossomed in the last ten years. Partly it was due to the innovation, creativity and investment from the likes of Mortgage Brain and other system suppliers.

The ever-increasing demands of the FSA, and now PRA and FCA, have also been a factor, as have wider technological advances. Another driver has been the needs of brokers and consumers.

In 2010, the first sourcing systems were launched which could be used on and offline.  They allowed intermediaries to conduct around 80 per cent of the mortgage search and selection process from one screen.

2012 then saw the rise of the apps. In April 2012, apps were launched which promoted brokers and mortgage products to UK consumers. This was followed in 2014 with the launch of the industry’s first pre-sales, whole of market sourcing app for brokers on the iPad.

Even the Mortgage Market Review, which again required the industry to make substantial changes, passed off largely without incident. After the success of MDay, everyone involved was confident the technology could cope.

And today? We have up to the second information with unrivalled accuracy and software, and data updates that can be automatically uploaded. Sourcing systems are now invaluable aids to compliance.

Perhaps the most exciting recent innovation is the concept of online ‘device independent technology’, allowing brokers to work quickly and efficiently wherever they are and on any device.

Mortgage sourcing systems have evolved from being a single structure to a family of solutions with brokers using them in ways that suit them and their business best.

And the future?  Mortgage technology will keep getting better. Consumers and brokers are demanding ever higher levels of speed, interaction and adaptability, and mortgage sourcing needs to keep up with their demands – and those of the FCA and the European Mortgage Credit Directive which comes in to force in March 2016. 

One thing is certain: adaptation and change is the norm.

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  • Chris Hulme 18th May 2015 at 12:33 pm

    It’s great to hear that sourcing system providers are standing behind the data they provide to brokers as we have heard all too often that systems blame the lenders for the info being incorrect and lenders blame the sourcing systems.

    One post-MMR issue that does still exist is that sourcing systems still derive solutions based on Income Multiples or Loan to Income to give it its fashionable name is today. Some lenders show “multiples” of 9.99 times income on one system….

    The breadth and depth of detail needed for Affordability to be part of system sourcing seems to preclude sourcing system providers from being accurate enough on this yet its one of the most fundamental parts of sourcing a product structure for a client in the post-MMR world.

    The detail, knowledge and experience of the person advising the client is more important now than ever before…..

    I’m sure the system developers and providers will find a way… one day.

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