Borrowers circumstances are becoming increasingly complex as people work later into life and draw a salary and income from many different sources. So while an individual approach to underwriting is often welcomed by brokers is it the case of too much subjectivity between underwriters?
This week’s panel of experts analyse whether manual underwriting is all its cracked up to be.
Dale Jannels, managing director of AToM, discusses the benefits of having face-to-face conversations and manual assessments, creating opportunities that traditional high-street lenders may not have been able to capitalise on.
Charles Haresnape, managing director, mortgages and commercial lending, Aldermore, explains the importance of approaching all applications on a case-by-case basis, so as to ensure certain borrowers are not excluded from the market due to automated underwriting.
Lea Karasavvas, managing director of Prolific Mortgage Finance, says that whether cases are written on a manual or automated basis, it is down to the broker to ensure that timescales are properly managed from the outset and formulate a recommendation appropriately.
Dale Jannels is managing director of AToM
AToM has used a manual approach on many cases, including complex, for more than 20 years. Throughout this time, we have found the benefit of a conversation with a human being and a manual assessment invaluable. Certainly something an automated decision making system could never provide.
These lenders tend to be smaller than the mainstream, but nevertheless, they have an appetite to lend and willingness to help. From experience they can see behind the veneer.
Such examples will include charges on multiple properties, guarantors, lending into retirement, funding to properties held in a trust and unusual properties.
Where problems tend to occur are with lenders which have been predominantly automated and now want to get in on the manual approach, especially where they can ‘price per risk’ accordingly. The problem stems from underwriters who have been used to a strict criteria manual unable to work outside the parameters they are now championed to lend.
Two different underwriters will have two different views and sometimes are not encouraged to take risks or agree something that is ‘unusual’.
As the market continues to grow this area will only increase. Where the high street says no, the manual assessment lenders have a huge opportunity to capitalise and increase market share. But most of all, they are helping the end consumer who might otherwise have given up after being knocked back by the high street.
Charles Haresnape is managing director, mortgages and commercial lending, Aldermore
There is a group of borrowers who are being edged out of the market due to automated underwriting and a failure to accommodate individual circumstances that do not impact on a person’s ability to repay a mortgage. In our opinion, manual intervention adds value to under-served creditworthy applicants, who are sometimes poorly served by high street high volume players, where the computer says ‘yes’ or ‘no’.
We pay particular attention to applications where cases can be more complex. Aldermore approaches all applications on a case-by-case basis with affordability being key, rather than using a fully automated system. Each case is individually assessed by our underwriting team. This means we can take a flexible approach.
Our specialism is this underserved market, whether that is self-employed people, so-called ‘mortgage prisoners’ or first-time buyers who are backed by their parents. It comes down to affordability and common sense. There are an increasing number of customers who are different from the norm, and who may suffer from the unintended consequences of new regulation. We love these grey areas.
Lea Karasavvas is managing director of Prolific Mortgage Finance
While there can be more delays with manual underwriting, I do believe that there is still a demand for it. Not every case is a perfect fit for the parameters of a computer-driven decision and with such a large proportion of the work force now self employed with more diverse income structures there can often be the need for manual underwriters to delve that little bit deeper into an applicants make up and see the true merits of a case. Derived income from trusts, from multiple businesses, from long-term investments or pensions, many of these will not fit within the variables of a computer based underwrite, and need to be assessed manually for the right outcome.
That said it is down to the broker to ensure that the timescales are managed properly from the outset and not to over promise and under deliver to their clients. The process of manual underwriting is obviously more labour intensive, but if the outcome is a positive one, then it is time that would have been put to good use to reach the preferable outcome for the client. However, it is a case of positioning this with both the applicant and the vendor/agent at the outset.
If speed is of the essence then a broker will be aware of this at outset and will then use this to formulate their recommendation appropriately. My personal belief is that it would be wrong to hold the lender to ransom over timescales whereby the complexity of the case warrants a manual underwrite. The key is in the time management of the case and so long as lenders continue to hit their service level agreements, however long they may be, and we are making clients aware of these, the role of the manual underwrite is most needed, and welcomed.
