"As the profile of the self-employed community continues to change, many mainstream lenders are either failing or are unwilling to keep pace with complex income scenarios."
There’s rarely a dull moment in the mortgage market and whilst it’s not always easy to keep fully up to speed on all the news and views emerging from our exceptional trade press, there are always headlines which tend to capture your attention on any given newsfeed.
A recent example of this for me was ‘Why inclusive lending is becoming more important than ever’ and it did so for a couple reasons. For starters, although I wasn’t sure exactly what the article would be about, from the headline at least, I was already nodding my head in agreement. Secondly, I assumed it would have a tech heavy slant. It didn’t exactly pan out that way but even so, this was a piece which still resonated from a tech provider perspective.
The article in question from Pepper Money outlined that inclusive lending is about being able to offer mortgage products to those customers whose circumstances see them sit outside the criteria of high street lenders, whether this is due to adverse credit, complex income, or their type of employment. It also raised the important point that it’s difficult for an automated underwriting system to take varying and more complex income into account or to understand the reasons behind potential changes in the way the applicant has earned their living.
As I said before, the relationship between technology and specialist lending has not always been the most cohesive, in part, because of the above case in point. However, technology has advanced to support such lenders in many different ways. OMS has integrated with a range of specialist lenders to allow users to benefit from direct access to individual product ranges via a full two-way integration, providing the ability to generate a full decision in principle, without the need to rekey any data. This type of technology helps streamline the application and admin process but certainly does not undermine or undervalue the need for the type of flexible, bespoke underwriting processes where specialist lenders really excel and set themselves apart. And this is certainly apparent when it comes to meeting the needs of self-employed borrowers.
As the profile of the self-employed community continues to change, many mainstream lenders are either failing or are unwilling to keep pace with complex income scenarios. Of course, this issue is nothing new, but it has been further exacerbated by the recent pandemic. To combat this, many specialist lenders are reassessing their criteria demands accordingly. For example, Bluestone Mortgages recently updated its credit policy to support self-employed borrowers impacted by Covid-19. The update will apply to applicants who have experienced a reduction of more than 10% in business income as a result of the pandemic, but who have since seen their earnings return to pre-pandemic levels.
This is just one action amongst many from specialist lenders which are aimed at helping such borrowers to overcome changes in circumstance, income complexity and credit issues – many of which are the result of consequences far beyond their control. These are largely being facilitated by robust and sensible manual underwriting and it’s prudent to point out that this is being supported by enhanced front and back-office processing. A fact which really serves to demonstrate just how important the balance between technology and the human touch really. And this is a vital combination which will continue to help specialist, and mainstream, lenders to meet their lending/service targets and the ever-changing needs of borrowers across the UK.