New approvals in the mortgage lending industry continue to show an upward trend and the “doom and gloom” of the past few years is starting to lift.
There are already signs that competition amongst lenders is becoming more intense and when the current focus on keen interest rates becomes un-competitive from a profitability perspective, there is a good chance the next step is going to see lenders moving up the risk curve. The loosening of credit policy is already being called for from many sectors of the market place and there are sound arguments to support some relaxing of criteria for certain sectors. Even without formalised extensions of criteria, loan approvals could start to involve “exceptions to policy” in order to gain competitive advantage.
The time has now arrived to evaluate if any lessons have been learnt from the “credit crunch” of the past five years, with regard to underwriting for risk. As an example, we have seen well written policies and procedures (P&Ps) but often they were not being adhered to. Exceptions to policy are often for good reasons, but where they exist there should be a policy to support such actions. We would therefore encourage lenders to review their own P&Ps to ensure that not only they reflect current market conditions, but most importantly to confirm internal departments within the business are adhering to them.
We have the ability to support such reviews, having had extensive experience working with lenders and holders of mortgage assets to help them to review P&Ps and ensuring that improvements are being implemented and maintained correctly. Recent projects include helping potential new entrants to build P&Ps from scratch. We were specifically chosen to help one client based on the reputation we have built over the past five years of providing high quality work and the ability to call on industry experts to match our clients requirements.
Reviews of P&Ps should not be limited to lenders or asset holders – now is the time to implement improved processes across all sectors of business in the financial sector in preparation for an improved economic outlook.