In the truly unprecedented times that we live in, I think lenders should be applauded for their response to the Covid-19 pandemic.
When the government announced in mid-March, not only a lockdown but that both residential homeowners and buy-to-let landlords could have a three-month payment holiday, lenders literally had a matter of days and in some cases hours to respond to these events.
Back at the beginning of the year when plans were being made for 2020, no-one could have predicted this and even the most robust disaster recovery plan is currently being stretched to the utmost.
With lenders swamped by never-before-seen volumes of calls and having to put work-arounds in to cope with a totally remote workforce while experiencing a significant drop in income, the pressures have been mounting from every side.
Never have we been more reliant on technology than we are currently. The segments of the mortgage market still working are now almost 100% reliant on various forms of technology to carry out even the most basic tasks – and it is probably not an overstatement to say that the measures being put in place during this pandemic are likely to change the way we work forever.
The need to pull together
While the government has been doing what it can, there has never been a more important time to pull together as an industry, and even as a country. And there are signs that this is indeed happening.
Many organisations, lenders included but particularly technology companies, have upped their game to help businesses of all sizes to work remotely, with many offering services or solutions for free to help people cope. And the solutions being developed, as well as the new ways of working, are unlikely to disappear when the crisis is over.
‘Necessity is the mother of invention’ goes the old adage and never has this been highlighted more than in the past few days and weeks. Every business of every size faced having to adapt or go out of business.
Not only is it changing working practices, businesses of all sizes have been forced to find an acceptable way for their staff to work from home, but issues such as finding what mortgages are still available, finding out what the current criteria are – and even which lenders are still lending has become a monumental task for some.
Knowledge Bank was one of the technology businesses that immediately stepped up to the plate to help. Following the Government’s announcement on payment holidays, its team worked throughout the night to build and launch a free Covid-19 live feed of lenders’ criteria changes within 24 hours, populating it with lenders’ policy and criteria.
This is providing a central repository for criteria and policy information that both brokers and other lenders can check – and that lenders can themselves keep up-to-date to ensure accuracy. It was given to the industry for free as we wanted no barriers to adoption to enable us to assist as many people as possible.
And never was it more needed. In under two weeks there were 3,000 different criteria changes recorded and a month on from the announcement there are still regularly an additional 300 criteria updates per day.
Initially the ‘Covid-19 Criteria Live Feed’ just contained payment holiday information for residential and buy-to-let lenders. But this was rapidly expanded to include second charges, bridging and other criteria relevant to policy surrounding the coronavirus pandemic such as reduced LTVs, income and affordability assessments for furloughed workers, product transfer eligibility etc. All information that brokers and borrowers are crying out for.
The live feed was designed to help stem the tide of calls that lenders were facing every day. While borrowers needed to apply in person for their payment holiday, it at least gives brokers another place to go to check which lender was doing what, so they didn’t add to the volume of calls. The feedback from lenders has been fantastic as they saw how using technology in this way has the potential to massively ease the burden on their own resources.
Impact on the future
Looking at where we go from here, now the initial panic is over there are a number of positives. Fundamentally there isn’t a problem with the supply of funds; certainly not for mainstream banks who have access to the Government’s Term Funding Scheme (TFS) and these lenders most definitely still want to lend.
Non-bank lenders reliant on securitisations and the money markets have been placed in a more difficult position and there is a desperate need for the Government to recognise this and make a similar scheme to TFS available for these lenders.
On top of the health issues, lenders have been dealing with four main issues on the back of Covid-19, but these will have long term implications and will require technological solutions that are in place for much longer than the next few months.
Depleted or remote workforce
As social distancing requires people to self-isolate and avoid their work places where possible it not only reduces the workforce but can also make them less responsive if not handled correctly.
This has been a tremendous challenge, especially for some of the larger and more established lenders whose systems are older and less flexible. However, remote working is likely to be ongoing for some time to come and it could well be that many organisations never again have the same volume of people working in an office as they have done to date; so the need to be able to work effectively from home is likely to be permanent.
This creates the need for the whole of a lender’s workforce to be able to access the systems and information they would have had access to, were they still in the office. Of course the need to both design and access product details and customer information with at least the same speed as before will be essential.
While lenders have many different automated systems from mortgage originations to servicing to CRM, many older systems may well need to be updated. The customer journey might well alter as could each lender’s interaction with brokers.
With so much of a lender’s time spent dealing with existing customer requirements, any revenue from new customers, particularly that coming via brokers and requiring less administration, is likely to be welcomed. But without the manpower for manual intervention the need to automate any processes that aren’t already will become ever more pressing.
Once again technology will be needed to make these processes as smooth as possible. For example, product and criteria feeds to lenders’ own websites using third parties and APIs to keep the information up-to-date, are likely to be the new norm where they are not already in place.
Managing call volumes
The ongoing flood of calls asking about payment holidays has required most lenders to redeploy a significant number of the staff they have still working to service existing customers. While this is a short-term priority, it is unlikely to be just a short-term challenge.
The challenge looking forwards will be how people then exit their payment holidays. Some of those people may still not be able to make payments after the three-month period, especially if furloughed or if furlough turns into redundancy. Others will want to know why their monthly mortgage payments are now higher than they were before they took the payment holiday.
Lenders will need to update their products, their criteria and their policies to deal with this. To avoid the calls of the past month becoming a longstanding issue, brokers and networks can be the lenders’ friends, an additional workforce helping to advise clients what their next steps are.
But it is of diminished help if each of those broker organisations then needs to phone a lender’s helpdesk to find out what their latest lending policy is. Few, if any, lenders will have the time to update every network, mortgage club and large broker separately on every single criteria change.
More than ever, the need for an accurate, up-to-date, centrally held source of criteria and policy information will be vital, so their phone lines are not clogged with calls from brokers, networks and mortgage clubs adding to the volume from existing customers.
And what about in-house mortgage advisers? As product and policy information changes, their needs will be the same. They will also need to be a centrally held, reliable source of information that takes seconds to access – and how much more sensible to have just one source that is viewable by internal and external brokers and advisers, so there is only one version of the truth and only one thing to update rather than many?
A filtered version of the same criteria search information, available to each lender with just their own information helps to streamline this. It will save hours updating different systems, freeing up staff to take priority calls instead. An instantly responsive system, such as that made available by Knowledge Bank, could save hours of time over the year in searching for answers.
A ban on house moves
The government’s request for a delay on house moves for the current time is not helping generate new business.
Also hampering lenders’ ability to lend are external situations such as the temporary closure of Land Registry offices in both Scotland and Northern Ireland with no work-around in place, which stopped completions happening in these countries. Registers of Scotland is now accepting digital applications.
It means that for the foreseeable future, lenders’ focus will be on remortgages and product transfers, but with a pent-up demand likely to emerge as soon as this ban is eased in any way. At this point lenders will want to release new products back into the system, but it will be this time where market intelligence could be more important than ever.
It is hard to operate in a vacuum so the need to compare your products with what another lender has released, to judge where your criteria should lie in relation to the rest of the market, will be more important than ever. As will the ability to see, in real time, what exactly it is that brokers are searching for on behalf of their clients in order to indicate where the current demand lies.
It is technology and searches such as these that may well give different lenders an edge and help them to judge just how much or how little to loosen their criteria to get enough of a market edge without being a complete outlier.
A change in valuations
Finally, the Government’s guidelines on social distancing, have made it impossible for most lenders to have physical valuations carried out which are an essential element for many lenders to issue the mortgage offer.
Many banks and mainstream lenders are moving rapidly to embrace desktop valuations and AVMs and undoubtedly the technology here will develop even more rapidly to produce a viable alternative to many mainstream valuations.
At the moment this is not something that is possible for many non-bank, buy-to-let and bridging lenders to use. But this is a key element of the lending process and a policy that is likely to have a huge impact on which lenders both borrowers and brokers use as soon as any restrictions are lifted.
As soon as the Covid-19 payment holidays were announced by the Government on 17 March 2020, it was clear that brokers would be inundated with enquiries from their clients and that lenders’ phones would be busy with brokers enquiring about the process for payment holidays on behalf of their clients. Helping to stem this flow was behind initiatives such as the Covid-19 Criteria Live Feed as well as initiatives from a number of other companies.
Lenders can only do what they can around these issues but they have certainly risen to the challenge. This is against a backdrop of being forced to change the way in which they work, to set up both staff and systems to support remote working – and with the additional challenge of the security around the tech that they use to facilitate this.
But they’ve done it. Despite the sensationalised headlines and the scaremongering of the national press, lenders are lending. They’ve had to make changes to the way in which they conduct their day to day business, but haven’t we all?
Alongside them many tech companies have risen up to offer support, from free CRM systems for brokers, to video-conferencing help to make communication easier, both across businesses and with clients.
Those still here in a year will be those that have overcome the technical and other challenges and embraced the new future that it will lead to.