Forget the implications of the imminent statutory regulatory regime, which will no doubt close down many broker firms. Perhaps even more pressing is that technological advances now seriously threaten the existence of many firms in the mortgage advice sector. Hundreds, if not thousands, of intermediary businesses face a bleak future due to increased use of technology in the mortgage delivery food chain. Many brokers and packagers will become superfluous to lenders and consumers unless they change course swiftly.
Take credit scoring as an example. Lenders now apply computerised score cards, which have all but removed the underwriting mandates of branch managers. Very rarely can a broker now twist the arm of a local branch manager, have discretion applied and get a client case through. We increasingly see end-to-end processing whereby the broker submits his client’s application online, the case will be auto-credit scored, and reference requests instantly dispatched. Overlay the power and accessibility of the internet and you have a real threat to brokers and packagers.
Why do clients need you, if they can get instant lending decisions via the web? The whole packaging movement is born out of a labour-intensive paper-based mortgage delivery mechanism. And that old fashioned mechanism will be obsolete within a few years, if not within months.
My second example is the valuation process. Many firms, particularly packagers, involve themselves in arranging valuations and generating a significant income stream from it. Brokers and packagers commonly profit from the valuation fee charged to the client. And the broker might also have a business reciprocation arrangement. These arrangements are seriously threatened by increased technology: if the UK market follows the US and Canadian lead, up to 65% of valuation assessments for mortgages will become desktop appraisals, based upon postcode and statistical historic data.
I would urge any firms who still make their living from the old-fashioned, paper-based mortgage processes to think again. The great news is that none of this technology can compete with face-to-face mortgage advice ‘ lenders and consumers will always need intermediaries to fulfil this crucial role.
Robert Clifford is managing director of mortgageforce