Mainstream lenders have, on the whole, taken a lighter touch approach to underwriting, using automated data-driven processes to access large volumes of applications, whereas specialist lenders have been more hands-on with their underwriting, using technology to support and enhance a manual process.
Consequently, the expectation has been that a mortgage application to a mainstream lender will be processed more quickly than one submitted to a specialist lender.
Not anymore, however.
The problem with automated data-driven processes is that they require a track record of consistent information in order to make a decision.
They are less effective at assessing an application from a customer who has recently experienced a significant amount of change.
So, in the current environment where everyone’s lives and most people’s finances have been impacted by Covid-19, the large mainstream lenders are having to take a more forensic approach to ensure they continue to make robust decisions, accounting for any recent changes to a customer’s circumstances, particularly when it comes to lending to the self-employed.
This means changing processes and resource models that have been built to support light-touch underwriting, in order to accommodate large numbers of applications that now need a hands-on approach.
Turnaround times equivalent
Specialist lenders have built their entire operational model on the individual assessment of every application and recruited the expertise specifically to do so.
The result is that the perceived difference in turnaround times between mainstream lenders and specialist lenders no longer exists.
All lenders now need to take the time to understand the individual situation of a customer applying for a mortgage.
So all lenders are on a level playing field and as a consequence many mainstream lenders are currently working to significant backlogs, whereas some specialist lenders which are used to this way of working are up-to-date across their application processing.
For brokers who have not worked with specialist lenders in the past, because they have worried about the impact of individual underwriting on timescales, there has never been a better time to work with a specialist.
When it comes to choosing which lender you will recommend, take a look online at the published service levels to see which type of lender might provide your client with the better experience.