Sponsored Content
Jerry Mulle
UK Managing Director
at Ohpen
Most lenders to whom we speak are prioritising their IT spend on improving their originations platforms to providing much better journeys for brokers and borrowers. Is it real time, easy to understand, does it offer clarity of decision more quickly, does it help underwriters focus on their jobs rather than chase documents? It’s not surprising in so far as the fight for market share in the UK mortgage market has always been acute. Origination has therefore understandably commanded a lot of the intellectual space. There is so much more that could be done – we all know the inefficiencies of the current processes
However, the systems of record that ultimately underpin the borrower’s financial experience are starting to command as much attention. In part, as per the challenge with originations, because of the cost of legacy systems when it comes to upgrades and ‘keeping up’ with the demands put upon them not only by the business but also by the regulators.
Conduct requirements, and the need to evidence good practice from origination and beyond, is increasingly in the sights of regulators – especially as we move through the credit cycle.
At the BSA conference, David Bailey’s speech gave an insight into the Bank of England’s thinking on these matters. Looming large was the pressure on household finances and their implications for Societies. He said, “…consumer confidence [is]at its lowest levels since the 1970s, households increasingly focusing on value and cost savings in their spending habits… the stress on household finances is likely to increase as around 4 million mortgage borrowers see their monthly mortgage payments increase, including as borrowers roll off the current fixed term of their mortgages over 2023.”
The impact will drive specific expectations of how lenders manage their distressed borrowers. It is an interesting point because while arrears at the moment are undershooting nearly all lending forecasts, the real pain will come in 2024 when those on the last set of short-term fixed rate products go onto SVRs that already feel closer to the 3% stress rate against which they were tested.
All this of course will need managing from an operational point of view and evidence will be required to show the right things are happening. In much the same way that Consumer Duty will change the requirements lenders have over their processes and systems so the PRA will be expecting to see tight control from lenders of their procedures. Two, in particular though by no means exclusively, caught my eye. David Bailey listed, “Early outreach to customers whose finances are most vulnerable in the current circumstances whilst bearing in mind relevant FCA guidance,” and “Ensuring that customer support and collections arrangements are appropriately scaled so they can expand rapidly if need be.”
My point here is that the demand for flexibility and agility and the ability to scale a procedure or system process will likely be as acute in the operational management of borrowers as it is in originating the loan in the first place. You do not need to eat the elephant at once, but you do need to understand the dynamic nature of not just the market but the regulation market that encompasses it. This needs origination and servicing systems that are agile, scalable, and interoperable to meet the demands of today and tomorrow – whatever they might bring.
