As the busy house-hunting season begins, those in the mortgage market
expect a hectic time. But this year, lending growth has at record levels.
Mortgage business is booming and should provide great opportunities for
lenders and introducers.
So why does this season bring groans from the IFA community who view this
as not much money for too much hassle? Especially when it should be seen as
a lucrative door-opener.
Indeed, many IFAs have decided against re-registering with the Mortgage
Code Compliance Board, deciding to concentrate solely on selling investment
products. Many have found that the poor service they receive from lenders
has made mortgages an impossible product to make honest business from.
Selling mortgages is not an easy process. First, as if the sale itself on
the customer's premises was not hard enough, just look at what has to
follow – initial quotes, lenders to be selected, application docu- ments to
be completed, references to chase, valuations to organise, documents to be
presented to the chosen lender, offers to be chased, solicitors to be
selected and completion to be chased from all parties.
All this before an IFA can even think about chasing the lender for fees.
When things do go wrong, it extends this lengthy process and often the
lender is to blame. What is going wrong and why is this happening?
Many of the lenders' inefficiencies appear to be caused by severe lack of
resources, which means they fall behind with processing. One recent story
involved a lender being four days behind in opening its post. Another
lender refused to talk directly to IFAs, offering them only an answerphone
message saying they will not be able to get back to them for at least 48
hours. All this results in mortgage applications stacking up. One IFA tells
of how a straightforward mortgage application took six months to complete.
Imagine the frustration for the IFA and customer.
Stacking up produces a dichotomy for IFAs. Their role is to scour the
market for the best rate but the lenders offering the best rates are often
the ones most likely to stack up.
So should the IFA recommend a less financially attractive product to
provide a quicker and less stressful experience for the consumer?
Lenders' inability to provide adequate resources at this busy time is
clearly not good for the IFA or the customer.
But it is not just a lack of resources that is to blame for lenders' poor
service. A common grievance is when, after the initial introduction,
lenders go direct to the customer to catch up on their backlogs.
This makes it confusing for the customer who suddenly has another party to
deal with. Typically, the lender will ask customers for information that
has already been given to the IFA at the fact-find.
This frustrates the consumer and makes the IFA look inefficient. If this
situation escalates to the point of role rev-ersal – where the customer is
updating the IFA – the IFA gets quite rightly annoyed. Although rare, it
has been known for a lender to try to sell other products direct to the
Other lenders make the process more protracted by making admin errors.
One example is of a mortgage offer that took five attempts to get right.
First, the lender quoted the wrong interest rate, second, the name was
wrong, third, the length of term was wrong and finally the wrong repayment
method was shown before getting it right on the fifth attempt. In another
instance, a lender's mortgage documentation offered a £1.50 cashback
when it should have read £1,500.00. Overlooked by the solicitor, this
error was not noticed until completion date and caused mayhem in the chain.
Such errors are commonplace and are caused by a combination of outdated
and disparate IT systems, heavily paper-based processing and human error.
However, the most common gripe is when lenders fail to keep IFAs updated,
simply by failing to return their phone calls. Lenders clearly cannot
afford such inefficiencies going forward , especially when the onset of
mortgage regulation will make them responsible for introducers in the
advice and service that they provide. They need to find more efficient ways
of servicing IFAs and reducing their own costs of administering
One of the options available to lenders is to outsource administration to
third-party specialists. A new breed of outsourcing service company is
emerging – business services providers. These processing specialists can
provide an entire mortgage processing and admin operation as well as
providing mortgage packaging services to help make selling mortgages easier
for the IFA community.
BSPs also offer many more added-value resources, such as mortgage
consultancy, business implementation services and leading-edge technology.
They offer solutions that are flexible enough to manage the peaks and
troughs, the regulatory environment and the demands of the market.
At present, lenders make the mortgage process too protracted. IFAs end up
doing too much admin and chasing instead of selling. Lenders should be
considering options such as outsourcing, not only to support IFAs market
but also to save money wasted through poor admin.