These days the idea of waiting days or even weeks for information required to approve a mortgage is an anathema to all involved in the application process.
Delays are a lose-lose situation for banks, borrowers and brokers especially when they are not necessary or could be replaced by a more efficient way of doing things.
However, the growth of digitalisation means financial institutions also face the challenge of managing the delicate balance between sound risk management and delivering this faster time to yes.
For many of these lenders, varying degrees of automation may provide the answer.
Automated Valuation Models (AVMs) have been a huge success since they were first used in the UK fifteen years ago.
Today we estimate that AVMs account for 10% to 15% of all valuations for mortgage origination and they have also been used to replace regional house price indices for the purposes of provisioning and capital management.
Readers of Mortgage Solutions may have seen the news that the European AVM Alliance (EAA) published its first set of industry standards for statistical valuations of residential property.
This documents the dos and don’ts when building, applying, monitoring and managing AVM models and other statistical valuation techniques.
Although AVMs have become an integral part of the mortgage approval process, there are mortgage applications that sit outside a lender’s AVM criteria that still do not warrant a full physical valuation. This could be because there is enough information available on that property to produce a robust collateral value estimate without the need to inspect the property.
We call these semi-automated valuations and we deliver them via the Hometrack Valuer solution. These valuations are carried out by a surveyor following a robust, risk managed, desktop valuation process that combines data and technology to make available all the information needed to produce a valuation.
On average a valuation takes up to 15 minutes.
While these types of valuations are yet to be widely adopted within the UK mortgage market, they have been standard practice in Australia for many years.
Hometrack has been live testing this in the UK for the last two years. The solution fits into the existing valuation workflow and communication between lenders and panel managers.
At all stages of the process the surveyor can escalate the case to a full physical valuation and it does not require a surveyor to have knowledge of a local housing market, as all the required information, analysis and risk measures that are needed to make a sound valuation solution are already captured.
We believe semi-automated valuations could replace up to 25% of all mortgage valuations.
This could free-up resources of panel managers and surveying companies to process more valuations more efficiently while freeing capacity for the more complex, higher risk cases.
This would put brokers’ and borrowers’ minds at rest that the risk of unnecessary valuation delays is reduced without compromising accuracy.
Achieving faster, accurate mortgage valuations while maintaining a strong risk and governance framework will help boost operational efficiency and, more importantly, enhance the customer experience.