Paradigm calls for shift towards personalised underwriting
Mortgage lenders should adopt a more individual and personal approach to underwriting, says Paradigm Mortgage Services.
While the Government’s Funding for Lending scheme has gone some way towards kick-starting competition on rates, Paradigm fears lending levels won’t noticeably improve unless lender underwriting teams are able to look at mortgage cases on their individual merits rather than adopting a ‘tick-box approach’.
Paradigm says it does not want to see lenders moving unnecessarily up the risk curve, or even relaxing criteria, but it is urging lenders to show a degree of flexibility if cases are a hair’s breadth from fitting inside normal parameters.
Bob Hunt, chief executive of Paradigm Mortgage Services, commented: “Even with the best intentions, the mortgage industry as a whole has a tendency to miss the point at times. In the same way that the difficulty of saving for a deposit is sometimes overlooked as the main plight of first-time buyers in favour of other factors, so too are underwriting approaches ignored when assessing the current low lending levels and the number of new borrowers entering the market.
“Increased competition on rates and product innovation is all very welcome, but if genuinely suitable applicants are being rejected for somewhat spurious reasons, then nothing will change.
“From the conversations we have with our broker members, there appears to be growing frustration that, what many would deem, genuinely suitable borrowers are not able to secure the finance they need.
“This is a particular problem for first-time buyers who, for example, may currently live with parents or are moving between rental addresses. These are often young professionals on good incomes yet in a number of cases they have not been able to get a mortgage because they do not have a mature credit history or they have insufficient employment records.
“Other member concerns lie around the number of instances when some lenders have refused any human intervention on cases where simple mistakes have temporarily affected individuals’ credit ratings. Even if these oversights are immediately rectified, there appears to be a reluctance to take the mitigating circumstances into consideration.
“Self-employed borrowers are also suffering from a lack of understanding of recent tax changes and the ‘one size fits all’ attitude adopted by some banks is leaving perfectly viable borrowing candidates out in the cold.
“No-one is suggesting lenders return to the dark days of free and easy credit or start considering borrowers with poor credit histories, but many of our members would like to see a more common sense approach in cases where borrowers can justify their scenarios.
“If the lending market is to really kick into gear again, then a personalised underwriting approach is just as important as attractive headline rates and innovative products at low LTV levels.”