24 Jan 2018

Mortgage Introducer, January 2018

by Mark Blackwell, Director, eTech Solutions Limited

This article was originally published in Mortgage Introducer, Jan 18, pg 42


The recent DCLG Call for Evidence issued last Autumn was an expression of desire to welcome in a new digital age for the house buying and selling process. The ultimate objectives of an undertaking such as this are to reduce the number of failed transactions and achieve faster completions.


The intermediary population is a significant contributor to this market and would welcome improvements that reduce completion times, increase certainty and provide more transparency within each transaction.


Whilst around a third of respondents to an earlier survey of 2000 people highlighted a third of buyers and sellers wanted a faster service from conveyancers, 50% of buyers and 70% of sellers said they would be happy to enter a legal commitment to agree a schedule of exchanging contracts if an independent survey or valuation was available up front.


So, in a property buying world of caveat emptor participants in the transaction are keen to ensure greater certainty even at some potential additional cost.


There is a requirement for the lender to ascertain the credit worthiness of the borrower and the suitability of the security. These have both gone through changes in recent years, the former through regulation and automation. The latter through digitisation and better use of data to achieve sound property risk outcomes and better levels of service delivery.


Anecdotal evidence suggests a forecast of at least 20% of all valuation instructions will be non-physical inspections by 2019. This is also reflected by the increasing use of AVMs as another method of valuation used with or without a desktop review. Using comparable data sets and information including Land Registry, EPC, flood and subsidence risk, save huge amounts of time and cost otherwise spent carrying out physical inspections. Although highly efficient, this method alone might not be appropriate on some properties perceived as higher risk.


Technology can effectively triage a valuation instruction using any of the following factors. Environmental issues such as proximity to flood, coastal erosion, subsidence and mining perils, which are all easily identifiable. There is also geographic location and the surrounding area, such as proximity to schools, amenities and transport, whether the property sits inside or outside major motorway networks.


In addition, LTV will be a key if not the key consideration for a lender. How much skin in the game does a borrower have, will determine in large part the type of valuation needed to be undertaken.


Whether a property is above or below a certain value, property type and style may determine not only what type of valuation is required on the property but also who gets instructed to carry out the valuation, taking the surveyors capability into account. The decision to allocate a specific surveyor is also governed by their capacity and geographic coverage.


The fact is all these elements are easily determined and accessible to be made available in one single location. However, the real value add is in the rules that any system or process like this has and whether they can be configured by a customer at will and in real time. Businesses are dynamic and the risk environment is forever changing, therefore the ability to configure rules to stay ahead of risks is vitally important.


The changes happening in the house buying process will continue despite any interventions post DCLG calls for evidence. The dividing line is pre and post offer where much has changed pre-offer to improve the customer home buying or remortgaging process.


Removing a large volume of post valuation queries (PVQs) has helped in paving the way for quicker mortgage offers from lenders. We work with around 80 lenders and where possible we take their valuer guidance rules and map them intelligently into our SMART Survey iPad application, which means rules about security that lenders need adhering to don’t trip up surveyors as they go about their busy schedules assessing in many cases in excess of 25 properties a week from an array of lenders.


We look forward to extending the reach of PVQ systems to embrace the lender and conveyancer as well as the intermediary. Sharing data and sharing the problem will lead to quicker to query resolution and satisfied clients.


An area we believe will be helped hugely by greater data sharing will be in new build where availability of HMLR data, a single disclosure of incentive form and digital views of new build sites for surveyors to record more accurate data will all lead to better controls on service delivery times, concentration risk and potential fraud.


Using a rules based approach to valuation selection mean lenders can triage valuation instructions to deploy the most effective and efficient valuation pertinent to the property and their credit risk appetite.


These types of innovations are already deployed to the market and help in removing delays in getting properties valued.


Further improvements will only be welcomed as we step into this new year.

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