As Credit Risk Manager at YBS Commercial Mortgages, working with lending criteria is my bread and butter. But what is encompassed by the word ‘criteria’ as far as lenders are concerned, and why do we believe it’s so important for brokers to have a thorough understanding of it?
Put simply, ‘criteria’ is the outward communication (as well as an internal checklist) for a lender’s risk appetite. It helps lending teams to assess a deal and work out whether it’s possible for them to progress it, based on the details provided.
Obviously, this isn’t black and white, and lenders recognise that each case is unique, understanding the importance of flexibility as well as the need for a balanced view. The complex nature of the commercial market also means there is more chance of ‘grey area’ cases arising – perhaps now more than ever due to a more challenging market backdrop over recent years.
Why it matters
Having a core bedrock of criteria helps lenders to ensure they’re supporting the right deals and manage the risks involved, minimising losses by making sure a mortgage is likely to be paid, as well as being able to ensure they have appropriately skilled people to handle the kinds of cases they are committing to taking.
In a complex and fast-changing market like the current one, brokers, who will be dealing with multiple lenders, each with different requirements and criteria, have the difficult task of collating, translating and applying multiple sets of criteria to seek the best deal for their customer.
Lenders have a crucial role to play here. There are no third-party sites or sourcing systems within the commercial market which collate this information, so communication is key. A lender’s goal is to filter initial enquiries for those they can take forward and support – and if their criteria is clear upfront, this is easier to achieve.
This means lenders are responsible for putting out clear, accurate and speedy information to keep brokers up to date on the types of deals they will accept. This, for example, could be shared via emails, newsletters or LinkedIn, via roundtable discussions to share and provide feedback, or on lender websites.
Ultimately for brokers, mastering lenders’ criteria will provide access to the best possible deal for their clients by knowing where to place each application to maximise their chances of success. It also prevents deals getting further down the line, only to be told that they can’t be accommodated – causing frustration for both brokers and clients and wasting time all round.
At YBS Commercial, we’re always looking for innovative ways to collaborate and communicate with our brokers - especially with the flexible and hybrid working models that both lenders and brokers deploy which make this possible. This allows us to ensure the right people are in the most productive places to pass on information when needed.
Trust is important, information is key
To complement this clarity around criteria, there’s no doubt that trust on both sides is also incredibly important. Ultimately, we understand that brokers will always choose a lender they trust, who is available, reliable and easy to do business with.
The perfect outcome marries a thorough understanding of each lender’s requirements with investing time in building strong and reciprocal relationships.
It’s important that lenders don’t waste time unnecessarily either, for example by making sure they give a ‘no’ answer, if necessary, as early in the process as possible, to allow the broker to look elsewhere without delay. As a lender, we’re acutely aware, from our conversations with brokers, what a difference this can make, which is why we are striving for further improvements such as using an internal ‘deal forum’ to establish more quickly whether it is feasible for us to lend on a case or not.
Brokers help with this process by ensuring they ask the right questions of their client up front to assess the likelihood of acceptance based on what they know about the lender’s criteria. While nothing is entirely guaranteed - and sometimes things can’t ultimately go ahead because of information which comes to light during case processing - the more clarity there is up front, the less likelihood there is of unpleasant surprises, rework, delays and, ultimately, disappointment.
The evolving face of criteria
There’s no doubt that changes are happening in this space which will assist both brokers and lenders alike as we move into the future. For example, better availability of data, and technology advancements which will enable greater automation around elements of the lending process. As a business though, we recognise the importance of the human touch, and that technology complements, rather than replaces, this.
As a business, we’re committed to doing everything we can to ensure the whole process runs as smoothly as possible, and a key focus in 2025 for us will be on simplifying our criteria and lending standards to ensure they are clear and easy to understand, and I’d encourage other lenders to do the same. To thrive as an industry and serve a growing and evolving need which, ultimately, underpins the growth of regional economies, we need to work together, supporting the commercial market, our brokers and their clients.
