Mortgage Tech - Predictions & The Future

19th July 2017

"We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten" Bill Gates

Such a quote could not be more relevant for the world we live in.

The talk of 'Robo-Advice' and 'AI' knocking on the door to snatch your customers and whisk them away to the digital world of no return is an interesting one. A little far-fetched for mortgages, but still paints a great picture of how things could go, if you use a little imagination.

Like many, I feel confident the future of our mortgage industry will not be one where we hand over complete control to the machines, neither will it be solely powered by the traditional face to face mortgage adviser.

The landscape we play in will focus far more on the 'hybrid' approach in the coming years, empowering the customer to make their own decisions and engage with advice in a way that suits them. You know, the whole "meeting the needs of your customer" thing that so many other industries have managed to achieve.

Lenders, Brokers, Mortgage Clubs and Networks (to name just a few), all need to realise the industry is changing. Many will be surprised at how fast this hybrid approach will gather momentum. The last thing you want to be is left behind. Now, really is the time to engage with technology suppliers and get a feel for what is out there.

"Digital Advice" (although I don't believe your customers really care what we call it), is a place where the traditional ways of thinking, knowledge and experience is combined with the efficiency and power of technology.

This 'hybrid' or 'blended' engagement model will become mainstream in the future. Not only for mortgages, but for many other areas of financial services. Believe me when I say, things will start to change very quickly. In fact, it's already begun.

My Predictions for 2017 and Beyond

"Intermediary user numbers will drop by 20% in the next 5 years"

Let that sink in for a moment… 1/5th of intermediaries will not be here in the next 5 years. The 20% of intermediaries that don't make it in this changing world over the next few years are likely to disappear due to the efficiency of others. Advisers, firms and networks that do not embrace technology, do not continue to evolve and meet the needs of their customers, will feel the pressure as others in the industry find ways to better service those customers. The old saying "We have always done it this way" will do you no favours.

Those that embrace technology and survive, will be more profitable than ever in an ever-growing market. More lending, better efficiency and fewer intermediaries all adds up to a more profitable market for those that look to thrive in it.

"25% of all Mortgages submitted in 5 years will be via digital channels"

This won't be execution only, or robo-advice. But a true 'hybrid' model which empowers the customer to utilise technology at their convenience, and in a way they feel comfortable and familiar with. While calling on the strengths of human interaction and experience to give the final advice, cross sell and provide reassurance in what the customer is doing.

Let the customer add value and feel in control, technology add the efficiency and seamless working platform and the adviser to utilises their knowledge and experience to give the advice.

"Big Data and AI will replace 90% of manual underwriters within 10 years"

Our current perception of the 'Vanilla' client is set to change. Machine learning and big data will allow much of our industry to be underwritten without human interaction. Yes, there is most likely still going to be a future need for true specialist products to be manually underwritten. This I have no doubt of. But how we currently class as a 'specialist product' is soon to be re-written.

AI coupled with vast amounts of on-demand data (in part fed by the Open Banking revolution), will create an entirely new landscape for machines to crunch numbers (which is what machines do best).

Instant offers, data transfers with no real need to scan and upload documents. Statements pulled directly from the bank, spending habits and trends analysed. Instant valuations via AVMs, conveyancing and customer authorisation all performed instantly via APIs. Costs go down, processing times speed up, and risk becomes far easier to quantify. This utopia is a way off, but it will happen.

We are on the edge of an unbelievable transformation within the mortgage sector. Let's embrace it and finally start to catch up with other industries. The next few years will be make or break for many people and we are here to support those that want to lead the pack.

When it comes to tech, the hare beats the tortoise every time

10th January 2017

On a quiet evening over the Christmas break, in the hope of being able to switch the TV off for a while, I found myself reading Aesop's Fables to my children.

The story of the tortoise and the hare, known to most of us, seemed a good place to start – it had animals, tick, there was a race, tick, and there was a meaningful life lesson at the end of it, big tick.

When I was young this tale was a particular favourite. Nothing wrong with being slow and steady it taught us, keep working hard, diligently moving forward, and you will eventually win the race.

Unfortunately, this message appeared totally lost on my children, and a healthy but unexpected debate ensued. Surely, it was pointed out to me, the hare should simply have set an alarm on his iPhone to wake him up to ensure he completed the race ahead of the tortoise?

After some discussion, I concluded that they were right. In ancient Greece where these tales supposedly originated, the tortoise may well have eventually defeated the hare. But today? No chance. In the modern world, the hare gets out ahead, and technology keeps him there until the race is ran. Of course, the tortoise can use technology too, but he's always going to be a tortoise, there's only so fast he can move.

The most exciting part about working in technology, particularly in the mortgage industry today is being the hare. Get out in front, set the pace, adapt to changing conditions quickly, and never ever stop for a rest. If you do that those big lumbering tortoises won't catch you - their very nature means they simply can't move fast enough.

The same goes for Intermediaries and Lenders in today's mortgage market. Ask yourself, with all the technological change going on around you, do you want to be the tortoise or the hare? Do you want to be setting the pace, or always playing catch up?

And if you want to be the hare, shouldn't you be working with other hare's to help you achieve that, rather than a big lumbering tortoise?

Battle: Broker vs Technology

29th November 2016

"Where do we draw the line between all this fancy technology and the value of my mortgage adviser?"

A few weeks ago, I was asked that exact question by someone who knows very little about technology or the world of mortgages – My 92-year-old neighbour.

I was attempting to explain what I do for a living and the industry I work in. I don't believe it went very well… as I'm almost certain Rosemary now believes I'm single handily responsible for the financial crash. While helping to destroy the world of lending with my army of cyber robots and systems that will take people's jobs and destroy the known world as we know it.

One might say... our chat could have gone better.

But it's a very valid question that has been raised in some way or another, more times than I care to remember. I'll admit, usually through the more likely person – a mortgage broker, over old Mrs Whitaker next door.

Broker facing technology is there to aid not replace. It's all about getting you majority of the way there, while still ensuring you do what you do best and advise your client.

Don't get me wrong, I'm a huge believer in AI, robo-advice, algorithms and generally anything else that can give a customer what they expect in this day and age. But for now, I'll focus on broker-facing technology and the systems that allow you to be even more than just a mere human.

Sourcing systems are a great example of this, allowing you to expand your knowledge across thousands of products and see a snapshot of what the market is offering at any given time. Some do this better than others, but should get you 80% of the way there in choosing the right product for your client. Not try and dictate who to go with.

For example, only you will know what lender BDM came for a visit last week and told you about a new product, or that special underwriter who has helped you in the past with a tricky case. A sourcing system is never going to know these things, and in all honesty… doesn't want to.

Sourcing systems are there to narrow the products available, not try and replace or counter the knowledge you have built up in this industry as mortgage brokers.

This is where using lending criteria or client eligibility via sourcing needs to be taken with a pinch of salt. Yes, criteria based sourcing is a huge step in the right direction for more accurate results, without trying to replace the value of a broker. Adding real value and accuracy to narrow your search, without leading you towards one lender over another.

Client eligibility checking is a completely different game though. Checking a client's affordability, bank statements, outgoings, credit report or the lenders appetite to lend is not always a time saver. Is the system checking every lender? Does the system work effectively when there is manual underwriting involved? How much data is it checking to provide an answer?

I have heard brokers in the past tell me that many lenders struggle to know their own lending appetite at that specific date and time, let alone allowing a system to tell you.

How many times has a sourcing system told you a product isn't available, only for you to then call the lender or BDM and get the product you knew existed? How many times have you found the best product for your client, only to struggle getting your technology or compliance steps to match what you know is best for your client?

Sourcing systems and mortgage technology in general is far from perfect. But it doesn't need to be. Let sourcing systems get you 80% of the way there so you can do what you do best.

Until more lenders make available their detailed lending criteria, client eligibility details and all the things they hold in that magic black box of theirs. I suggest we leave that side of things firmly with the brokers and their knowledge of the market and products for now. Yes, you might save some time with the odd DIP/AIP. But I would hate to be the one trying to justify my recommendation based on "the system said so".

The world of Fintech is changing faster than ever before. But let's not get ahead of ourselves until we fix the basics first.

In defence of sourcing systems...

05th August 2016

I'm a little surprised to be the one having to write this – I was expecting a vociferous response to recent criticism of sourcing systems from one of our more established competitors. But alas, the silence to date has been rather deafening.

It didn't used to be this way of course. Up until a couple of years ago, the duopoly that existed in the market ensured very little debate around the virtues of sourcing systems. Everybody had their favourite and, unless your Network said otherwise (And sometimes even when they did), you stuck with it. It was very much a case of 'better the devil you know'.

So why are we finally debating the role that sourcing systems have to play in how effectively we service the end client? Simply put, the industry has woken up to how woefully inadequate legacy sourcing technology is in helping an intermediary deliver the right consumer outcomes.

Historically, sourcing systems were viewed as a necessary evil, a compliance tick box exercise. The broker relied more on their own skill and knowledge, as well as their relationships with local BDM's to help place a case. At best, a sourcing system was a list of available products, ordered typically by rate, that gave the average intermediary a place to start their research from. As soon as a client's circumstance strayed away from the 'vanilla', legacy sourcing technology was arguably about as much use in assisting the broker in finding the right product as a chocolate fire guard.

Such has been the level of criticism of the lack of development in sourcing technology in the last 10 years that many have questioned what, if any real improvements have been made in that time, and perhaps rightly so.

But playing devil's advocate for a moment, what possible incentive did the duopoly have to invest in their sourcing systems in the last 10 years? If you believed the hype, and excused their poor grasp of maths, both systems had 70% market share, a core base of devoted users, and a nice cash flow coming in every month from both intermediaries and lenders (Even during the economic downturn). For those of you who studied business at school and are familiar with the Boston Matrix (And even those of you that aren't), sourcing systems were your archetypal 'Cash Cow'.

The reality of course is that intemediaries weren't demanding more from sourcing systems either. They accepted their failures, ignored their quirks, and found workarounds which enabled them to do the minimum required to process a case. As an industry, we got stuck in a rut, confusing 'good enough' with good.

Personally, aside from our own involvement, I credit regulation with highlighting the failings of legacy sourcing technology. With MCD on the horizon, a number of specialist distributors quickly identified the need for a far more robust sourcing system that looked in detail at all solutions in the market, not just first charges. Many, by partnering with third party technology experts such as ourselves, have created robust and accurate sourcing systems that consider a client's entire circumstance, and are able to recommend the appropriate product, be that a mortgage, second charge or even bridging loan.

I'm not suggesting for one moment that these, or indeed our own sourcing technology is perfect. It's simply never going to be possible to build a system that is able to take into account every nuance in a Lenders criteria or understand and calculate around every possible variance of personal circumstance. And besides, would you really want it to? Isn't that level of 'Robo advice' in itself the beginning of the end for mortgage brokers as we know them?

But even the most experienced broker in the country can't be expected to know, or keep up to date, with the 9.2 million pieces of lending criteria that a good sourcing system will hold, and source against. A good sourcing system should be capable of applying all of a client's personal details across a huge array of Lender criteria, helping you to make the right recommendation first time around. It should also take into account different lending options, including second charges, accurately assessing the right product type for your client's circumstance.

A sourcing system will never be a replacement for your skill or knowledge. It will never replace the relationships that you have with your clients, and indeed the Lenders themselves. But if used to its full potential, a good sourcing system really can help you service your clients efficiently and effectively, and to the very best of your ability.

If you've been reading in the trade press the recent critique of sourcing systems, and found yourself nodding along in agreement with the general theme and comments, then it's time to do something about it. Whether that's to encourage your existing provider to invest in their system, or to look to find a new provider, don't sit on your hands any longer. When it comes to sourcing systems, 'good enough', just isn't good enough anymore.

The right technology will ease the strain of MCD rules – Twenty7Tec

07th April 2016

James Tucker of Twenty7Tec discusses how the right technology can support brokers and lenders in getting ready for the Mortgage Credit Directive.

I read a quote recently from Czech historian Konstantin Josef Jirecek that seemed to rather neatly sum up what many of us feel about the forthcoming implementation of the Mortgage Credit Directive (MCD): "We, the unwilling, led by the unknowing, are doing the impossible for the ungrateful".

I would imagine that for many lenders in particular, this quote rings true as they think about MCD. Indeed, even the intermediary market remains polarised by different approaches to the new regulation. ​But does it have to be this way?

​As is often the case, technology can play a significant role ​in helping intermediaries operate successfully and compliantly in the post-MCD world.

Simply put, if you're an intermediary who wants to advise on second charge or bridging loans, then you need the technology or process in place to show that you have evidenced why that product is​ more appropriate for your client than a remortgage. In fact, even if you want to hand off the responsbility for that advice entirely, you ​will ​still ​want​ to be able to identify when to hand off, and when actually, a remortgage is absolutely the right choice.

​Many specialist distributors have introduced sourcing systems that help you to identify when a second charge could be the right option – if so, then the system can let you seamlessly transfer that client's data to your preferred distributor to take full responsibility for the advice.

We're also seeing networks and directly authorised firms looking to use independent third party secured loan sourcing systems to enable their advisers to source and compare second charges.

​It may be a brave new world that we're entering after the 21 March, but if you choose the right partners to support you, it doesn't have to be as scary as it may seem right now.

A look back at a year in technology – James Tucker

23rd December 2015

James Tucker, managing director of Twenty7tec, takes a look back at this year's technology highlights in the mortgage market.

Finally, the tide has turned, the direction has shifted and we have crested the hill – okay enough, you get the idea.

This year was the year that intermediaries, lenders and third party software providers decided to invest in modern, efficient and scalable technology solutions not just to see them through the next 12 months, but for the next 12 years.

We have seen networks such as Mortgage Advice Bureau and Personal Touch Financial Services delivering major enhancements to their in-house CRM systems, whilst the likes of Intrinsic have invested large sums in their partnership with IRESS to roll out XPlan to all of their members. The results of network approaches to investment in technology may have been mixed, but there can be no denying that the purse strings have well and truly been opened.

Third party CRM providers also stepped up their game in 2015. 360 Lifecycle launched the first fully integrated point of sale system, with fact find, mortgage, protection and conveyancing quotation engines fully embedded early in the year. Mortgage Brain completed its integration of The Key with Mortgage Brain Anywhere shortly after.

Lenders have been active too with many investing in new intermediary portals adding layers of functionality and service to aid intermediaries and clients in the application process. It seems though, that the big investment from lenders in technology is still to come, as some look to leverage technology to wrestle market share back from the intermediary.

In the life space, the speed of innovation is increasing rapidly. IPipeline launched Solution Builder to help advisers speed up the solution shaping and quoting process. Systems like Solution Builder make it easier to show your clients how they can meet their protection needs in an interactive way, understand whether they will be rated, and rapidly quote and apply.

Even in the conveyancing market, (not an industry synonymous with technological innovation), big strides have been taken. Sort Refer launched a free app which allows users to source quotes from conveyancers within seconds, offering real time case updates and notifications. Meanwhile United Group launched estateagent4me, a new free website that ranks the performance of all types of estate agencies.

Finally, and by no means least for obvious reasons, Twenty7Tec launched the first independently-owned sourcing system for mortgages, secured and bridging loans, enabling a detailed comparison of remortgage versus second charge lending options – a must have for intermediaries in the post Mortgage Credit Directive world that we will enter in 2016.

​As for predictions for 2016, I would say that lenders' investment in technology will accelerate, faster than any of us in the intermediary space expect, to both protect and win market share. Technology enables lenders to differentiate their proposition, to reach untapped audiences and to accelerate potential cost savings. If there is a perception that lenders have had a quiet 2015 on the technology front, that is about to change, and in a big way.​

Shared data model among lenders could spark 'revolution' – Twenty7tec

07th December 2015

Sharing a common model for data across lender's product criteria and even mortgage applications could allow intermediaries access to efficiencies never seen before in the market.

It may not have been a story that piqued many people's interest given the news on buy-to-let taxation, but in November the Council of Mortgage Lenders (CML) and Which? announced a new "tariff of mortgage charges". This aims to introduce a standard format for how lenders communicate their fees, making it easier for customers to understand charges and compare deals.

Perhaps more interestingly, at the bottom of the press release announcing this, was a further note stating that the CML will be leading a project on agreeing a standard comparison method for lenders to adopt in 2016. Sound exciting yet?

Well for a technology business such as ours, it's potentially very exciting. Presently, when lenders send out updates on their product ranges or criteria information to intermediaries and sourcing systems, they do so in their own format, with their own data structures and terminology. If taken to its logical conclusion, this action from the CML and Which? could be the first step toward an industry standard set of criteria options for a mortgage 'product' – the creation of a common data model that determines the criteria upon which products should be compared and selected.

The application of a common data model increases the opportunities for data transfer between lender and sourcing system, ensuring that product data held on the system is always 100% accurate. It would also make it far easier to build rule based logic across more product criteria, enabling the system to deliver more accurate product recommendations.

Clearly, there will still be variables and nuances in criteria models, and any move to this more structured approach shouldn't come at the cost of product innovation.

If we see the emergence of a common data model for product criteria, we could also see the creation of a common data model for mortgage applications, and this is where it gets really interesting. At the heart of every mortgage application form, is the same data structure, but lenders have historically used different terminology and formats to capture what is often fundamentally the same information.

An element of common data structure across all lender applications would help facilitate the automatic mapping and transfer of client data from intermediary to lender system. This would give intermediaries the ability to instantaneously submit applications, and receive decisions from multiple lenders, without having to re-key into each lender's portal. The efficiencies that this would bring to the whole mortgage process would be enormous.

This seemingly insignificant piece of news could end up being a great example of the law of unintended consequences. I wonder if the CML and Which? realise that they may have just started a revolution in mortgage technology?

Lenders' role in truly integrated technology

21st September 2015

In the world of mortgage technology, 2015 has been the year that providers finally delivered on the many years' worth of promises to provide fully integrated systems for intermediaries.

Thanks to innovative companies such as 360 Dotnet, advisers are now able to enter client data into just one platform, simultaneously populating sourcing results for relevant mortgages, insurances and even conveyancers.

But the reality is that when it comes to a truly integrated process we're only half of the way there. Intermediaries are still forced to re-key all their client information into lenders' own portals when looking to submit an application. Should that lender turn the client down, they will then be forced to enter the same client information again into a different lender's portal. This process is costly, inefficient, and all too often results in poor experiences for the end client.

A number of providers have attempted to address this issue over the years, and to finally enable the seamless transmission of client data between intermediary and lender systems. Unfortunately however, the systems created have delivered little more than smoke and mirror style integration, with intermediaries invariably seeing no tangible benefit in their use versus re-keying client data into the lender's own portal.

As such, take up of these systems in the intermediary space has been poor, and lenders have been left wondering why they would need to engage in integration projects with intermediary systems providers, when the solutions on offer simply aren't up to scratch.

But times are changing. The technology required to automatically transmit and map client data from intermediary systems to lender systems, offering single data entry, and instant application decisions, is already being employed successfully in numerous other industries. And soon enough, we will find it being employed in this one.

When that happens, instead of wondering why they would need to engage in such integration projects, lenders could soon find themselves wondering what will happen if they don't.

Case study: Integrating a mortgage sourcing system

21st July 2015

Personal Touch integrated Twenty7Tec's mortgage sourcing system into its own back office technology at the end of 2014. David Carrington, sales and marketing director, recounts the journey and how it has benefited advisers and the network.

A Personal Touch objective this year is to put more technology into member's offices to give them more time to spend with clients. At the same time, we wanted to ensure they were using a sourcing system that gave the best customer results and could give real time access anywhere.

As a consequence we needed a mortgage sourcing solution that would be capable of integration into our own bespoke, back-office technology, 'Toolbox'.

The due diligence process was detailed and extensive. During the second half of 2014 we ran all the enquiries into our member mortgage desk through the existing sourcing engines and a new option – Mortgage Source from Twenty 7 Tec. This enabled us to check the accuracy, relevance and number of matches for a wide range of cases over a number of months.

The Mortgage Source system uses detailed lender criteria and the skill in its effective use is learning to manage the numerous filters effectively. Once mastered, we consistently found that their live system delivered the most accurate results time after time. It was slightly unnerving at first to see shorter 'league tables', but vitally they were providing more relevant lists.

The next step for us was to work out an effective integration plan so our members could use the new sourcing service within Toolbox.

As Toolbox and Mortgage Source are both web applications we quickly realised we could deliver a fully integrated online solution to members. The benefits of this approach are numerous and include the following:

Members can move straight from a client record into sourcing – there is little additional client data input required – just the specific mortgage requirements. Once results have been obtained they are automatically stored on the client record, together with any research, stress test and KFI documentation produced.

The audit trail produced helps the adviser in future conversations and helps us fulfil our quality review responsibilities more effectively. As one of our members, Mark Thurman commented:

"I do like the system integration with Toolbox as it saves time! I like the way it also makes sure you have entered all the relevant information before allowing you to proceed with source."

Wherever possible our approach is to give members a choice and so we made the early decision not to prescribe use of Mortgage Source but to allow them to choose which solution suited their business best. As integration creates potential future savings for us through processing efficiencies we made the decision to include Mortgage Source as a member-inclusive benefit with no additional cost.

The initial roll-out was on the standalone web system while integration was completed. This gave advisers the chance to play with the system and understand the sourcing logic better. Since Easter we have been steadily rolling out the integrated version and have been delighted with the response.

The biggest challenge for busy advisers is changing habits from tried and tested options, but once they do they have been delighted and really appreciate the time savings and slickness of a system fully integrated into Toolbox. As we experienced during our due diligence process, the results look different. The league tables are shorter, but that's because unlike an online supermarket – throwing a couple of random items that their computer thinks are a match for your order – the system only presents relevant and available products.

Integration of MortgageSource into Toolbox has been a collaborative effort between our in-house development team, MortgageSource and of course our advisers. It has been a long journey but all parties are now starting to reap the benefits of the integration.