Q&A: Specialist underwriting vs mainstream underwriting

Mortgage Introducer

October 18, 2018

Clare Jarvis (pictured, left) is head of national accounts at Pepper Money

Underwriting is a common topic of conversation when I meet with some of our brokers and distribution partners. As a specialist lender, I put a lot of emphasis on the individual approach we take to every case compared to the more formulaic stance of the mainstream, and how this can lead to more positive outcomes for their clients.

But you don’t have to take my word for it. We have a fantastic underwriting specialist called Zenzi Tinkorang (pictured, right) who joined the business last year from a high street lender [Lloyds Banking Group]. I asked Zenzi for her views on the differences between underwriting at a specialist lender and a mainstream lender, and her top tips for brokers.

What is the main difference between working as an underwriter for Pepper Money compared to a mainstream lender?

ZT: Working as an underwriter for a specialist lender is a very different experience to working as an underwriter for a mainstream lender. The criteria is broader here and so I have the leeway to make my own decisions.

With a mainstream lender, a case either fits lending policy or it doesn’t – there’s no room for judgement. I have the power to assess a case on its own merits and make my own decision based on the information presented to me. Cases are more complex and I have more input into our lending decision, so it is a much more rewarding role.

I often work with clients who have had a life event that has impacted their finances and, as an underwriter at Pepper Money, I can take a view of what has happened and what steps the client has taken to improve their position, so there is much more of a human touch than with a mainstream lender.

Do specialist lenders ask for more information than mainstream lenders?

ZT: One way of understanding an applicant’s finances is by looking at their bank statements to understand their income and outgoings and piece together a picture of their circumstances. We don’t ask for any more information than when I worked with a mainstream lender but we do review that information in more detail to help us a make the right decision.

As an underwriter who works with interesting cases every day, what are your tips for brokers to ensure that their cases are processed smoothly?

ZT: Talk to your regional development manager about the case at the outset to get a good idea of whether we will be able to lend. Then, when you submit a case, you will be sent a checklist of documents to submit to support the application and if you are able to submit these documents quickly, we can hit the ground running and start working on the case.

The waiting game can be stressful, so always try to submit all of the documents requested as this makes the process much easier. It’s also important to only send the documents that we request. Underwriters have to review any information that you send and sending more than you need to not only means the underwriters will have to spend more time reviewing these, but it could also lead to more questions about the application, which could stretch out the process.

Do you have tips for brokers when it comes to working with self-employed clients?

ZT: Following the improvements we have made to our self-employed proposition, we have started to receive a lot more applications from self-employed clients. My tip for brokers on these is to make sure you are clear about whether your client trades as a sole trader or a limited company. If the client trades as a limited company, don’t send the SA302, but instead send the company accounts, which should be signed by the director and the accountant. For sole traders, you can send the SA302.

And do you have tips for brokers who work with contractor clients?

ZT: We have also improved our offering for contractors and so we receive a lot of applications from brokers with contractor clients. My tip on these is to be clear whether your client is employed on a fixed term contract, a contractor set up as a sole trader or a contractor working through a limited company.

For a fixed term contract worker, ask whether they pay their own income tax and National Insurance or whether it is paid at source. If tax is paid at source, they count as an employed contractor and you should submit payslips with the application. If they pay their own tax, they are considered to be self-employed and so you would submit the SA302.

For a contractor working through a limited company, we look at the day rate contract and the company accounts, if the contractor has been trading for more than 12 months.

Whenever submitting proof of income for a contractor, we will always require standard proof of income documents in addition to their current contract.

We give brokers direct access to our underwriters because we believe that establishing a clear channel of communication is the best way to find solutions to your interesting cases. So, next time you have a question about a lender’s approach to underwriting – pick up the phone and speak to an underwriter.

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