Underwriters can get a raw deal, none of the glory when consumers are able to borrow and often all the blame when they cannot. Lending decisions made in the later life arena can be devastating for customers as they discover they are not as financially secure as they thought. Rejection can leave them unexpectedly forced to sell the family home and, in marginal cases, it’s underwriters who hold the keys to a successful transaction.
We spoke to three underwriters and while they were unanimous in saying most advisers are doing a terrific job, we asked them to talk about some of the challenges they faced and how advisers can improve their clients’ chances.
Less is never more
Everyone knows the cost of arranging a lifetime mortgage is higher than a traditional home loan because it takes a lot longer. From the wet signatures to the face-to-face advice from brokers and solicitors, as well as extra medical checks in many cases, it’s a labour-intensive process. The last thing anyone needs is unnecessary delay but this is where some brokers fall down. It all boils down to what one underwriter sums up as “less is never more”.
Yvonne Turnbull (left), head of underwriting at Just, said: “It’s understandable that a broker might consider holding back information which they think is non-essential and may not work to the customer’s advantage, but in reality this can slow down an application. From an underwriter’s perspective, the more information on an application the better, less is never more.”
Brokers are most likely to want to leave out information they think will harm an application.
Hayley Woodhull, an underwriter with Legal & General Home Finance, says regularly they have to hunt out missing information and this causes a lot of “back and forth”.
“Sometimes we find details of all the applicants’ outstanding commitments are missing, which is really important if we are making an affordability based assessment,” she said.
“We will pick these up through the bank statements and credit search. However, this can often result in having to go back and forth to clarify various debits identified, including regular payments or standing orders to different individuals.”
Another piece of crucial information is the condition of the home, and defects that negatively affect its value. Yvonne says this detail is often left out, only to get picked up by the survey.
“Brokers are frequently the first person in the application process to view a property. If they see something that they feel may affect the application they should take that into account on the application. It will avoid delay later in the process when a surveyor spots it.”
“Some examples are damp or an element of disrepair. Alongside these considerations, there are some emerging risks around property, such as coastal erosion and flooding, which a broker should bear in mind.”
Don’t be selective about customer circumstances
Counterintuitively, brokers can also hold back on information that could help their client because they are prone to trying to predict what information the underwriter will need and stopping once they get there.
“I can recall an application where I had identified an undeclared commitment which would ultimately result in the application not meeting affordability,” said Hayley. “The loan was required to repay the applicant’s existing mortgage and carry out some home improvements.”
“While looking through their bank statements, I identified that they were also receiving a small state pension which hadn’t been declared. This small amount of income was sufficient to allow us to lend the required amount. If the applicants do have additional income that may not initially be required, it can be beneficial to declare it in case there are any additional commitments which need to be factored in.”
Sometimes brokers leave out information about a client’s health and lifestyle, even though this information can also strengthen the application, rather than harm it. “Sometimes what a customer may be sensitive about can work to their advantage,” says Yvonne.
“Discussing a client’s lifestyle and health conditions should be done skilfully. The information uncovered can really benefit the client using medical underwriting to help the customer achieve a better deal. Similarly, clients may be reluctant to disclose adverse credit history, but teasing out a little more detail will help a broker place the application with the most appropriate lender and avoid the application being delayed or rejected.”
This is how trying to second-guess the underwriting process can lead to delays and then there are the more mundane reasons that the process drags on. Sometimes it’s as simple as a missing address history, says Hayley, but extends to disclosing who else lives at the property and will need to sign a deed of consent. Surprisingly, dates of birth are sometimes incorrectly entered, leaving electronic ID checks stuck in neutral.
Failing to do all this properly can bring unintended consequences, and attention.
“It could also affect the maximum loan on an equity release mortgage,” says Hayley.
“Presenting the correct information upfront could negate the requirement for an underwriter to review the application before a valuation is instructed. Therefore, it’s essential the correct information is given upfront.”
Gavin Hancock, underwriting team manager at Pure Retirement, said he believes all brokers mean well but are sometimes guilty of trying to steer an application through by cherry picking the pieces of information they think underwriters want to hear. In reality, he says, application processes are so tight now that there really isn’t any point in overthinking it
“Our application process is specifically designed so that brokers can add supporting information, ensuring all the details required are to hand. We ask that brokers don’t shy away from sharing information they have collected from clients.
“In particular we have found this can happen on the purpose of the loan funds. We really do need to know what the purpose of the funds is for. For example, if a client is using the loan for home improvements, then let us know more details such as if the improvements are structural or non-structural, plus a breakdown of the spend, whether it’s a new extension, new bathroom etc. This will certainly speed up the process.”
This feature is kindly supported by Pure Retirement. The views of contributors are not necessarily those of the Equity Release Council.
