Lenders should prepare for Smart Data by addressing the 86% of friction points in the mortgage journey they could solve without it, banks and building societies were told this week.
Experts from Novus Strategy, the transformation consultancy for the mortgage and home buying industry, described the quick wins that lenders could make now when they delivered a masterclass for transformation specialists from a series of banks and building societies.
As well as underlining that lenders didn’t need to wait for Government reforms and Smart Data to improve their own mortgage journey, Chris Williams and Kevin Duncan also lifted the lid on key findings they’d unearthed during their time spent with lenders, examining their real mortgage journeys.
They revealed that redesigning the mortgage journey now could address up to 86% of friction points that made it inefficient, resulting in underwriting speeds that were as much as 20% faster, from decision in principle to full mortgage offer.
Part of the problem, they said, was that friction was often hidden or not being measured correctly. In one case, a lender was doing a superb job of completing underwriting on each case in just 10 minutes — but weren’t counting the time that cases spent sitting in people’s inboxes. That meant they were underestimating the amount of time underwriting was really taking by over 99%.
This is the problem of ‘handoffs’, where a case, task or piece of data moves from one person to another, either internally or between firms.
At another lender, mortgage offers were turned around in 25 days but half that time was soaked up by handoffs, not the actual underwriting process. This also applied to misrouted cases, where different income types were misidentified, meaning these cases had to be redirected to specialist internal teams late in the journey, leading to delays of three to four days, despite the underwriting itself taking just 43 minutes.
Another example of avoidable delay include the lender that was checking customer identity up to 12 times per transaction, something that should be consigned to history by digital ID.
Tackling these inefficiencies will be important for all lenders expecting to participate in and benefit from the home buying reforms proposed by the Government.
The findings were all addressed in Novus’s webinar yesterday (Wed) called ‘Smart Property Data: Is Your Mortgage Journey Ready?’. In a live poll, four in five attendees confirmed they had not fully mapped the friction in their mortgage journeys and more than a quarter hadn’t started.
Chris Williams, Transformation and Strategy Partner at Novus Strategy, said: “Lenders aren't necessarily responsible for all of that delay currently. But what will happen is that lenders could ultimately become responsible for delay if the rest of the industry begins to improve their parts of the journey and lenders, inside their own four walls, keep doing the same things that they've always done.
“It's not just about the time then. This is also about the products that people sell. They’re not necessarily going to stay the same. The opportunity for all lenders is to push out different types of products.
“So it's not that hard to imagine [...] preferential rates for easily underwritten properties or full mortgage offers made earlier based on lighter surveying requirements. So this kind of transformation[...] is quite opportunistic. [It’s] about laying better foundations for future mortgage products and creating a defensive position.”
The audience also got to see how Novus’s mortgage intelligence platform, Pathfinder, could create a digital twin of lenders’ mortgage journeys, identify friction points and generate a phased investment plan to improve speed-to-completion, capital velocity and lending volumes.
Kevin Duncan, Pathfinder Product Director at Novus, spoke about the additional gains Smart Data would bring and why lender transformation now was important.
He added: “Preparation for smart data is a combination of three things — technology, processes and configuration. If we don't have all three in place, then we won't optimise fully for the Smart Data that's coming down the line. If we layer smart data on legacy processes, we will not unlock the value that can be realised.
“[It’s in] the redesigning of the mortgage journey in a way that's ready for Smart Data, that's where everybody wins. Not only are the original gains there, the indirect gains that will come through are absolutely massive.”
