Lessons learned from lending during Covid-19
By Kunal Mehta -
The pandemic has bought many challenges to the bridging market and while we have seen some of the larger lenders pull out temporarily, many of the smaller lenders have continued to provide finance, introducing new operating practices in their business.
Technology has been vital in enabling lenders to function during Covid-19. With many staff working from home, a major hurdle has been processing loan applications with speed and efficiency, while minimising the risk of fraud.
Prior to the pandemic, we invested heavily in leading-edge technology to produce a full legal pack in just 10 minutes, when manually it can take 3-4 hours.
Our software produces all the necessary legal documents, as well as generating a valuer instruction, regardless of whether it is a personal loan, business loan, multiple/singular properties, commercial or residential etc.
Even with complex loans such as third-party legal charges or multiple securities, our software is able to quickly produce the right documents, but doesn’t make lending decisions.
During the lockdown, we experienced an increase in loan volumes and our technology enabled us to deliver a better service to customers, by accelerating the process from initial offer to loan drawdown.
I believe technology needs to take an increased role in lending to make it quicker, cheaper and easier for borrowers to transact.
In April 2020, the international professional services firm, EY published its annual report into the UK bridging market.
According to the research, 58% of respondents cited speed of execution as very important for a customer when choosing a bridging lender and a further 46% of respondents cited high quality service from the lender as a very important consideration.
A further 23% of respondents chose funding flexibility as the most important capability when choosing a bridging lender.
There is a huge opportunity for technology to validate clients, enhance accuracy and speed up operational aspects.
For example, ID verification. There has been a surge in facial recognition technologies, which for us sorts out one problem, but it could go much further.
The industry needs a platform that pulls together the customer’s ID data, such as their driving licence or passport and integrates it with additional checks such as Companies House, peps, sanctions, anti-money laundering, insolvency register etc.
In essence, we need a tech solution that can do up to 20 checks.
Borrowers populate the application forms, but the borrower experience could be enhanced if the data was integrated, saving valuable time.
It really bugs me that we have to manually access over 10 data sources, repeatedly typing the client’s name and address.
However, not all technology is appropriate for the bridging market. AVMs and desktop valuations have created great debate and I feel they are highly problematic, mainly because, they are unable to identify problems in a property that would impact the valuation, such as structural movement.
We have reviewed our book and had we used AVMs, or desktop valuations across all the properties, we would have breached our loan-to-values in more than 50% of the deals.
While this technology might be appropriate for the High Street mortgage market, it is not for riskier, short-term lending.
As we come out of lockdown, bridging lenders need to embrace appropriate technology to ensure they maintain service levels, speed and reduce risk.
Our lending decisions will always be made by an experienced team, but we will continue to enhance our bespoke software to accelerate the underwriting and legal processes, putting the client at the core of everything we do.