Arrears mediation

Lenders are increasingly using field agents to interact with borrowers in arrears. Paul Duckworth, director of The Charlbury Group, explains how technology is helping to make the process slicker

Over recent months we have been working closely with a number of lenders and field agencies, firms that provide a variety of home visits to lenders. This is an increasingly important sector within the overall mortgage market and an element of the arrears and repossession process that is becoming more and more prominent.

The sector in numbers

The Association of Arrears Mediators (AAM) represents the five major field agencies that are responsible for over 90 per cent of all home visits instructed by mortgage lenders in the United Kingdom and their figures provide a sense of scale to this sector.

It is reported that since 2007 almost 850,000 mortgage arrears home visits have been completed and, by the end of the third quarter of 2011, over 100,000 pre-litigation visits (102,879) had already been completed.

The success of visits can also be seen as AMM report that 82 per cent of the fact finds being returned to lenders have a proposed arrangement to clear arrears, thus helping to prevent litigation or possession.

For lenders, tasked with making repossession the act of last resort when all other options have been investigated and tried the use of field agencies is an important weapon in their armoury.

There is little doubt that forbearance has had a significant effect, with just 46,000 repossessions in 2009 against a predicted 75,000 and just 36,300 repossessions in 2010 when 53,000 had been forecast.

The role of the field agency

Field agencies as we can see from the figures have a vital role to play not just in the mortgage sector but also for the wider economic environment. The level of repossessions influence provisions for social housing and benefits amongst others which is why pressure to help people stay in their homes is so intense.

One element of a field visit that seems universally accepted is the need for speed. Early identification of a credit problem gives both parties an opportunity to evaluate the circumstances and if a loan can be rehabilitated then the sooner the better. This is why we were so keen to establish how automation of the process could increase speed through efficiency.

A technical opportunity

The pilot of our system connected a selection of lenders to some of their field agencies. The aim of the pilot was two-fold; firstly to prove the ‘concept’ of introducing technology into what is historically a manual process and secondly to demonstrate the actual, practical application of such a system.

As a technology firm it was fascinating for us to build a system for the field agency sector and improve the way that instructions from lenders are received and how data is reported back.

As with so many parts of the arrears and repossession process, there is a huge reliance on paper and post which is, and has been, working for many years but modern technology offers a raft of opportunities and efficiencies that simply did not exist some years ago.

Therefore, a system was built where instructions can be taken from the lender and distributed out to a panel of field agencies electronically using lender-defined (and controlled) allocation rules.

One of the main challenges that lenders face for all elements of the arrears process is in demonstrating that they are acting efficiently and this is no different with the instruction of field visits and so reports are returned electronically and management information is collated automatically.

This use of management information has been happening in the litigation and asset management sectors for some time now and as technology gets more and more widely used by lenders and their field agencies so it will become more important for field agencies.

Speed and accuracy

Perhaps the greatest benefit of an integrated system is the removal of double keying of data. With data being automatically communicated between systems there is the obvious benefit of speed but perhaps even more important is the support of data accuracy.

There is little doubt that if client information has to be re-keyed then the opportunity for errors increases and so a fully integrated solution where no re-keying is required will surely lessen the opportunity for mistakes.

We also believe that one of the core components of any system should be to ensure that it does not force firms to change their process. Field agencies won business from lenders because they performed in a certain way and it is not the place of technology to tell a firm that they have to change the way they do things. Adapting to a new technology should be based on benefits and not belligerence.

Benefits of linking lenders and field agencies

•          Real time case allocation

•          Case tracking

•          Online report receipt

•          Independent, aggregated MI

•          Audit trail of instruction and progress

•          One integration links multiple parties

•          Eliminates post

It has been a pleasure working with the firms in this sector and proving that technology has such potential to support lenders, field agencies and borrowers. It is highly likely that there will be an increasing focus and visibility on this element of the arrears process and so it is in everyone’s interest to work towards the most efficient and effective process.