A recent poll by Mortgage Solutions found the majority of brokers agreed the quality of their business – from the point of view of a lender – should be judged by the performance metrics currently in use.
However, as was evident in brokers’ responses, which yielded 42.2% Ayes versus 37.8% Noes and a further fifth being ‘undecided’, brokers have reservations about how the data is interpreted by lenders.
While there is no one set way of judging the business lenders receive from brokers, they typically use a variety of broker quality metrics to guide their evaluations. For instance, they look at arrears, the quality of the paperwork submitted, completion rates and acceptance rates.
“It’s a good way of looking at a broker, not always the best way though,” said Mortgage Concepts Associates director Mike Richards. He said he agreed with using the metrics because the perception of mortgage brokers had “changed completely” in recent years. “We are seen as trusted advisers now.”
Despite this, he said, there were times a decision in principle (DIP) fell through when it was not the broker’s fault. Therefore dismissing a broker after a certain number of cases have fallen through was not the right way to go about it.
“They should be looking at the quality of the cases that do come in – the quality of the cases themselves should be the judge of that broker,” Richards said.
John Charcol’s Ray Boulger agreed performance metrics were fine as long as lenders used them right.
“They must drill into them and seek to have a conversation with the broker to see why things are the way they are and what can be done to improve things,” he said.
Commonly used measures such as acceptance and completion rates as well as arrears could be influenced by a range of factors outside of the broker’s control, such as the client deciding to pull out last minute, or finding a better deal elsewhere after shopping around, he suggested.
Similarly, while high numbers of arrears within the first three months of a mortgage may indicate a problem with the broker’s vetting of clients, if they happen two or three years’ down the line, that may have little to do with the broker, he said.
“The best way for lenders to use these metrics is to see who stands out by a considerable margin and then understand why that is. If they are simply interpreted on a black and white basis that is too simplistic. They’ve got to be digging down into the details,” Boulger said.
Depends on who’s asking
Meanwhile, Steve Walker, managing director of specialist brokerage Promise Solutions, said the same principles could not be applied to brokers in his field.
“In the mainstream market lenders may well judge the quality of a broker by the metrics of how submitted business performs and the ease of processing those applications. However I judge a broker by how effective he or she is and lender metrics’ are only a small part of that – especially in the specialist sector,” he said.
Walker said specialist brokers tended to look for out of the box solutions for their clients, which could involve pushing cases to the edge of a lender’s criteria and negotiating.
“By definition our cases are harder to place and therefore more likely to hit a problem. Conversions will be lower than mainstream and if they are not it suggests you are cherry picking the easy cases. A good specialist broker will have a crack at cases others think have no hope. I think specialist lenders understand this and will judge brokers accordingly,” he said.
Besides, a broker’s business quality could never be judged by lenders alone, he said. “Lenders and borrowers will have different definitions of what good looks like and we need to keep them both happy.”