Steve Harness, commercial director at The Loans Engine, tackles the future of second charges next year ahead of the Mortgage Credit Directive.
Ever been skiing? By the time you read this we will just have left on Boxing Day and the children are bursting with excitement. Just hope the snow arrives in time – it’s not looking good as I write this piece.
But what I dread most is that first morning when everyone is crammed into the ski shop collecting their equipment. If you’re a skier you’ll know that the ski bindings are set to release safely if you fall, and are adjusted to your weight.
And therein lies a problem. Very few of us could guess our weight accurately on Boxing Day after the excesses of Christmas, let alone in kilograms!
Unfortunately, the same is true of our customers when it comes to their credit status.
In the good old days we had prime, near prime and sub-prime and it was fairly black and white which category each customer matched.
We would print off a credit report and highlight any adverse entries, match them to a lender product, and underwrite the deal.
That worked fine when there were only a handful of lenders in the market, and each had a slim product range, but we now deal on a daily basis with 17 lenders, which have policy rules, affordability rules and score rules.
So picture this. You’re looking to do the best you can for your customer, but to make the right choice between a remortgage, further advance or second charge you need to have accurate information to make your recommendation.
You’re well versed with the remortgage process and go to your usual sourcing platform, pull off some remortgage rates, and use your knowledge and experience to scan down the list for the lender with the best rate who you know will do the remortgage deal.
But will this approach work for you in the second charge arena when making a cost comparison?
Faced with a second charge rate table, which product are you going to use, to benchmark against the cost of a remortgage?
Is your customer any wiser about missed credit card payments, defaults, CCJs (and how old they are), not to mention their Risk Navigator score, than they are about their weight in kilograms? Probably not.
Well the good news is that, in our business, we have saved a few rain forests by no longer printing credit reports and slashed our highlighter pen budget. Instead, since 2003 we have developed loan sourcing technology available today – NEXUS.
Unlike other sourcing systems ours is integrated with Equifax and has API links to lender scorecards, meaning our sourcing is accurate.
This technology is available to brokers free of charge, and allows us and you to offer customers a true whole of second charge market proposition, and to compare second charge and unsecured loans instantly; a truly TCF-based proposition.
There are just short of 700 second charge products in the system, not to mention the unsecured products, but it will only display the products your customer qualifies for, ranked on price.
And remember, the deal is already underwritten, in seconds, so no nasty surprises downstream, no resells and most importantly you really can make a sound recommendation on whether a remortgage, further advance or second charge will give the best outcome for you customer.
As we motor into a period where seconds gain full parity with first charges, accessing such technology will be vital, and it will also ensure a first-class service is delivered, right across the board.
The second charge market is about to get a whole lot more interesting and those advisory firms who have access to cutting edge technology are likely to do best in this brave new world.
But enough of that I’m off to check the snow reports. Kilograms and MCD are the least of my worries right now!