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Kfis – the key facts

Research by Mortgage Brain reveals what introducers look for KFI generation and product selection. Mark Lofthouse, CEO of Mortgage Brain, assesses the survey’s findings

The FSA unleashed regulation on the mortgage industry and its arrival hit us like a train.

Some saw the train coming and took action well in advance while others were ready just in time and others were too late.

We are nearly six months into a regulated world. Who has made the biggest impression on the mortgage introducer? What are introducers doing and who do they trust?

Mortgage Brain carried out a survey in the last two weeks of March among its directly authorised and appointed representative users to discover who they rely on for product selection and generation of key facts illustrations. There were 746 responses spread evenly between directly authorised and appointed reps.

The need to produce accurate and compliant KFIs is crucial to introducers and is a key element within the process but it does not represent the overall process. Giving a customer an accurate KFI does not mean that an introducer is compliant.

With well over 20,000 mortgage schemes available on the market, the survey shows that 89 per cent of introdu- cers use sourcing systems for product selection.

Introducers trust sourcing systems well ahead of any other route for obtaining KFIs. Sixty-seven per cent of introducers are using a sourcing system as the preferred method of generating KFIs and less than 30 per cent use lender websites. Of that 67 per cent, the survey found that only 13 per cent always back this up with a KFI from a lender’s website.

When introducers were asked where they really wanted to generate KFIs, there was overwhelming support for sourcing systems.

Many opinions have been voiced about product accuracy as the reason to use lender websites but is this the real issue? I have had many discussions that started with product accuracy but ended up with liability being the real issue – if a lender-produced KFI is given to the client, then the lender must stand by it but is this really the case?

The introducer is ultima- tely responsible for advice and documents given to the client. What if the lender-produced KFI is incorrect and the introducer spots this? Introducers have commented to me that sourcing systems positively support the sales process, are easy to use and, in many cases, the KFIs are more reliable than those from lenders.

Regulation has focused the mind and put sourcing companies under the spotlight. Product accuracy is all about the process and procedures in place to strive for perfection and what action is taken in the event of a discrepancy.

Product accuracy scores 100 per cent and it is clear that the proactive verification undertaken by lenders and sourcing KFIs being checked against those from lenders is a major factor taken into account by introducers when selecting a product.

Lender product verification and KFI checking are clearly very important to introducers. The key questions that should be asked are:

l What product details are actually verified by the lender?

l Who is responsible for marking products as verified?

l Who withdraws verified products?

l When products are withdrawn, can KFIs still be produced in the event of material change?

l How does an introducer know what is been verified or not?

It is not enough just to know how many lenders verify products but also how much of the market is covered. As an example, over 50 lenders, equating to around 75 per cent of the market, proactively verify their product details on Mortgage Brain.

With KFI checking, more questions need to be asked:

l How many KFIs are checked? Is it a sample, one per lender product type or two or more per product? For example in Mortgage Brain’s case, it is up to 10 per product, based upon criteria with a minimum of four.

l What action is taken in the event of a discrepancy?

l How does an introducer know what is been checked or not?

Networks make recommendations to their members and directly authorised firms make their own compliance decisions. These questions should be answered, not just to an introducer’s satisfaction but also in comparison with the best available in the market. Do not forget the basics, are there terms and conditions in place?

All we have heard in the media for the last two or three years is how compliance will affect, has affected and continues to affect introducers. The burden has given introducers more than just a mild headache and the knowledge that there are solutions out there that can lighten the load is a huge relief.

The results of this survey have revealed that all the preparation before M-Day and the consistent reviewing of procedures have resulted in many sourcing companies winn- ing the trust of the majority of introducers.

The pressure on introdu- cers and lenders to meet MCOB rules is great and several who which not initially use sourcing systems to generate their KFIs have reviewed the stringent processes that sourcing systems have in place to ensure KFI accuracy and have, or are now, making the switch back. This survey indicates that this trend will continue.

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