Clearly, banks would rather be fiercely protective in regards to releasing their client’s data, arguably their most valuable asset – but how will this affect us as mortgage brokers?
New applications can, with the customer’s permission, access spending habits from bank statements. This might make for a few interesting conversations over dinner.
These apps can categorise outgoings into easily understandable sections such as credit commitments, household bills and insurance and potentially perfectly match customers to products that may benefit them.
Open Banking will also allow a lender to see a customer “warts and all” and take them on knowing the full picture.
Gambling on the lender
In theory that sounds great, but hang on a minute, “warts and all”? Let’s take gambling as an example.
Last year I put forward an application to one lender who asked for three months’ bank statements, on which were some gambling transactions which we too had identified.
I should add that this was a good case: healthy deposit, decent earners, clean credit, mature borrowers who never used or needed an overdraft.
The lender then asked me for another three months’ bank statements (so six in total) to which I asked: “What will that prove?”.
That they had only recently taken up gambling? Or conversely had they always been gamblers? Which is better? I sent in the additional bank statements which also had gambling on and the case was declined.
Re-place the deal
At the end of the day, underwriters can’t un-see what they have seen and if the case falls into arrears later on their neck will be on the block.
As brokers we definitely get that. But this customer was in a way penalised for his vice of choice, anti-gamblingism, if you will.
I felt the lender had made a wrong decision because the customer managed his gambling and finances well but all I could do was re-place the deal elsewhere, this time carefully selecting a lender unlikely to ask for bank statements.
The outcome was obvious, the case went straight to offer and the customers have now moved home – the correct outcome.
The dark art
Here, laid bare, is the “dark art” of mortgage packaging that dare not speak its name – it’s not always what you send in to a lender, it’s what you don’t send.
In my 20 years in the job, BDM after BDM has come in to see me and said: “Whatever you do don’t send us that payslip” or “We won’t even ask for a bank statement”.
So I am going to watch with fascination over the next few years as Open Banking challenges this.
Do the lenders actually want to know the truth? Will they then decline cases they would have previously accepted and miss their lending targets?
Perhaps there will be an even greater reliance on credit scoring and fast-tracking than ever before for the massive lenders who don’t necessarily have the capacity to manually underwrite each case?