One aggregator and one lender could come out with a “straight-through processing solution” next year, the heads of a software company have suggested.
Speaking to The Adviser, the head of the Australia and New Zealand arm of online financial assessment solution company MOGOPLUS, Mike Page, and chief information officer Marcus Cann outlined how comprehensive credit reporting, open banking, and intelligent expenses software such as MOGOPLUS would combine to help deliver Australia’s first “instant decisioning” mortgage process next year.
The software company has reportedly been working with a range of lenders and broking groups to develop a customisable expense check tool, which can be used by brokers to help demonstrate their responsible lending and expense checking requirements.
The tool works by enabling borrowers to log in and scrape their bank statements, which are then analysed, categorised and sent to their broker for review during the mortgage writing process.
Noting the recent commentary around the use of Household Expenditure Measure (HEM), the head of Australia and New Zealand said that there were several benefits of using the system, particularly given the current scrutiny on expenses interrogation off the back of the royal commission.
He said: “I think the first benefit is the customer experience. We have a simple, user-friendly experience to capture the data and give the customer a good experience. The second is to actually offer that data to the broker and, when that data is actually accepted by the broker, putting that data into the correct structure to enable them to make an informed decision and to enable them to achieve their responsible lending goals. And then the third benefit is what the broker can then do with that data, as in instantly pushing that into the lender rules engine and getting an instant decision.”
Mr Page added that the lenders also benefit as they are able to access the data “in a customised way to see whether it fits their credit policies and decision engines”.
Looking to the future, the two technology specialists suggested that this type of capability, combined with comprehensive credit reporting (CCR) and open banking, could help deliver straight-through processing of loans and instant credit decisioning next year.
Mr Cann elaborated that the company, which had been operating in the UK during its transition to open banking, had been able to “actually make it happen”.
“So the proof is ultimately in the pudding. We are able to step up and say ‘we’ve done it’ and straight-through processing is possible.
He concluded: “We see projects already underway right now whose aim is to be able to finally deliver on straight-through processing and instant decisioning in 2019. And the exciting thing for the broker market is that we see lenders and aggregators wanting to deliver that solution to the broker.
“So, I think 2019 will see at least one aggregator and one lender come out with a straight-through processing solution.”
Commissioner Kenneth Hayne looked at how lenders and brokers utilise HEM when fulfilling their responsible lending obligations — an issue that arose during the first round of hearings and has recently been a source of debate in the broking industry.
He highlighted that steps to ascertain whether the loan is unsuitable include “making reasonable inquiries” about the consumer’s requirements and objectives in relation to the credit contract, knowing the consumer’s financial situation and taking “reasonable steps” to verify the consumer’s financial situation.
However, Commissioner Hayne argued that the case studies from the first round of hearings suggested that “credit licensees too often have focused, and too often continue to focus, only on ‘serviceability’ rather than making the inquiries and verification required by law”.
He wrote in the interim report: “More particularly, identifying that the consumer’s income is larger than a general statistical benchmark for expenditures by consumers whose domestic circumstances are generally similar to those of the person seeking the loan does not reveal the particular consumer’s financial situation.
“All it does is convey information to the credit licensee that it may judge sufficient for it to decide that the risk of the consumer failing to service the loan is acceptable.
“Verification calls for more than taking the consumer at his or her word.”
Commissioner Hayne asked in the interim report: “If the consumer claims to have regular income, what step has the credit licensee taken to verify the claim?”
Find out more about the increased scrutiny around HEM and expense verification in The Adviser’s Responsible Lending webcast, available online now.
[Related: Royal commission questions longevity of HEM]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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