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Exclusive: Major banks reveal how they’re fixing turnarounds

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Annie Kane 14 minute read

Following on from concessions that broker-lodged loans take a lot longer to approve than those in the proprietary channel, the big four banks have told The Adviser what they are doing about it.

Earlier this year, the CEOs of the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Westpac and ANZ told the House of Representatives’ standing committee on economics that turnaround times are currently within one or two days in the proprietary channel but, on average, between 10 and 12 days in the broker channel.

However, the broker channel has been experiencing much longer delays than those reported (with differences in terminology and metrics exacerbating the issue).

Indeed, according to brokers responding to the most recent Broker Pulse survey from Momentum Intelligence, the big four banks were taking much longer to reach an initial credit decision, negatively impacting their clients.

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The survey, which asked brokers their experiences with lenders over the course of April 2021, found that ANZ’s turnaround time was at 23.4 days; CBA was at 15.1 days; NAB was the fastest major at 11.5 days, while Westpac was hovering around 19.4 days.

The heads of the FBAA and MFAA, having both previously stated that they are “seriously concerned” that the blowouts in turnaround times seem to only be impacting broker-lodged loans (and not proprietary loans). According to the broker associations, brokers are being “unfairly penalised”, which could amount to a competition issue.

Speaking to mainstream media yesterday (2 June), MFAA CEO Mike Felton commented: “These turnaround issues are forcing customers into a branch where they get one choice and no best-interests duty, which is not in the consumer’s interest.”

“We are happy to ride the roller-coaster as long as the proprietary channels come along for the ride, but when the differential is sitting at 21 days, that is not a competitive outcome.”

As reported on 7News earlier this week (see video below), the delays have not only been resulting in poor broker experiences, but – more concerningly – preventing borrowers from purchasing properties and losing out on auctions (as they are unable to meet finance clauses, which often require finance to settle in 14 days).

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In fact, the problem has been so prevalent that many brokers are now sending a greater proportion of their loans to non-major banks and non-bank lenders to ensure that their clients are able to access finance, and reporting better overall experiences.

Given the issue, The Adviser reached out to all four major banks for the June edition of The Adviser magazine, to discuss what the issues were and how they were working to fix them. 

ANZ

How turnarounds are faring

ANZ has been cited by brokers as having experienced particularly long delays in its turnarounds recently. According to research conducted by Momentum Intelligence for the Broker Pulse survey, the big four bank had, on average, been reaching initial credit decisions in around seven days between January-April 2020. Fast forward to 2021 and that had blown out to 19 days.

However, when speaking to The Adviser in May, ANZ CEO Shayne Elliott said that two-thirds of applications assessed through its branch network were automated and customers were receiving a first decision on average “within two days”.

Why turnarounds are different

According to ANZ’s CEO, the differential in turnarounds is due to the fact that broker- and mobile lender-originated loans are manually verified and assessed, while two-thirds of branch applications are auto-decisioned once documents are submitted, “meaning customers who walk in with all the right documents can leave the branch with a decision that gives them the confidence to bid on a property”. 

GM retail broker, Simone Tilley, elaborated: “There are additional verification steps that do need to be made for third parties, and that really is to meet our regulatory obligations, and that is causing the disparity. As a consequence of there being a third party [in broker-lodged loans], we are needing to do additional checks and balances to make sure that we’re meeting our regulatory obligations under responsible lending.”

Ms Tilley added that delays frequently come during the “verification of income and verification of expenses”, an issue that was brought to the fore recently during the controversial debate over repealing responsible lending laws.

She continued: “I think, historically, they have always been different. It’s never going to be parity until we get that full automation agenda in the business, which is going to take time, and as they are different channels, so we do need to assess them differently.”

What they’re doing about it

Mr Elliott told The Adviser in May that the bank had “historically [not] invested enough” in automation of assessment in broker, so he said it was “on the priority list at the moment”.

He continued: “While we’d almost doubled our assessment capacity, the new business we attracted regularly exceeded capacity. That means our assessment service levels in recent times have not been where we need them to be.”

“We know we need to improve, and we’re investing in all stages of our processes.”

Moreover, Ms Tilley said the bank had “made some strong inroads in the last 12 months around verification of ID and e-sign and e-verify” and was looking to replicate the automation agenda across the third-party channel.

“At the moment, there is a comprehensive automation program being undertaken to really amplify that automation agenda, and it’s very well socialised throughout the bank… but that’s going to take some time.”

Ms Tilley continued: “We’re looking at putting on more people; we’re looking at different policy opportunities; we’re looking at different process opportunities; we’re trying to look at the broader system really holistically and thinking about the root cause of where those bottlenecks reside. And we’re working collaboratively across our value chain to work together to solve the problems at hand. 

“We recognise we need to improve, and we have got a strong agenda in place to contract over the coming months.”

Mr Elliott said the bank was “confident” that it would see its first set of improvements in “the latter half of this financial year”.

CBA

How turnarounds are faring

The Commonwealth Bank of Australia has also seen its broker turnarounds expand in the past year. Its average turnaround between January-April 2020 was a speedy 4.1 days, according to Broker Pulse, but this increased to an average of 14.8 between January-April 2021. 

However, in February 2021, the major bank revealed that lending decisions were automated for approximately 65 per cent of home loans coming through the proprietary channel, often completed in the same day.

Why turnarounds are different

When asked by The Adviser in February, CBA CEO Matt Comyn said it was “somewhat easier” to increase decisioning speed from a proprietary perspective “because of the richness of the data that [it has] about those customers”.

Speaking to The Adviser, Adam Croucher, CBA’s general manager, third party banking, added that the reason for the delays in both proprietary and broker channels included “the exponential growth in home loan application volumes [which] has placed considerable pressure on [CBA] support teams and operations, impacting turnaround times for more involved applications”.

He added: “Processes to support an application through credit officers differ between the proprietary channel and via brokers, which may also impact our processing team’s ability to manage the increase in application volumes.”

What they’re doing about it

Mr Croucher said the bank had been making “significant investment” and bringing in resources, including nearly 400 new team members across Australia and approving “thousands of hours of overtime”, to keep turnaround times “at an acceptable level”. 

“We have also made a number of process changes to ensure we efficiently handle the huge number of applications coming through the door,” he said, outlining the bank had launched CommBank’s new DigiDocs process for customers with a Victoria, South Australia and NSW home loan. 

“We have also made changes to liability and conduct verification requirements for lenders and brokers to help improve the credit assessment process while maintaining strong consumer protections by reducing the amount of documentation our customers are required to provide during a home loan application and instead relying on CCR (Comprehensive Credit Reporting) data,” he said.

“This is particularly relevant for applications made on behalf of existing CBA customers where the turnaround times for our broker and proprietary channels are more closely aligned.”

He concluded: “We have also launched spot coaching for credit officers dealing with more complex cases so we can get brokers a response in a timely manner.

“We recognise the importance of the broker channel, and we continue to focus our efforts to deliver exceptional service to our brokers and their customers, with CBA broker turnaround times decreasing on average more than 40 per cent (between January and March 2021).”

NAB

How turnarounds are faring

NAB is one of the few majors who has seen its turnarounds improve this year when compared with last year’s. 

Broker Pulse data shows that NAB’s turnarounds for the broker channel were at their longest during the first few months of 2020, when they averaged 14.8 days over the four months January-April 2020. 

Over the same period in 2021, the average turnaround for broker loans was just under 10.1 days.

Why turnarounds are different

While speaking to the House of Representatives’ standing committee on economics in April, NAB CEO Ross McEwan suggested that ‘time to yes’ was dependent on loan complexity.

“For a simple home loan through a branch, or through one of our mortgage internal team, 50 per cent is in less than a day and 50 per cent is [in] five days,” Mr McEwan said.

“But if you’re starting to get into trusts and complex lending, you’re usually in our business bank basis, and on that basis it’s around 15-20 days... The same with our white label operation [Advantedge], it is probably around seven days.

“So, there’s quite a variation, but it does rely on the complexity of the loan – it can be as simple that if it’s a simple loan, then 50 per cent are less than a day.”

What they’re doing about it

Speaking to The Adviser, NAB’s acting executive, broker distribution, Nicole Triandos, commented: “We have recently taken a number of steps to simplify and speed up the time it takes for approval.

“We expect brokers will begin to see the benefits of these significant changes in the coming weeks.

“We have also made a series of process changes in recent months, which are already having a positive impact. These include the introduction of more recognise forms, hiring more credit assessors, and simplifying several policies such as ID and income verification. We are also focusing on submission quality, with substantial improvements seen this year.

“Some of these changes are part of an ongoing review of our entire end-to-end broker experience, which we are determined will make us the most reliable bank for all brokers and ensure consistent service across all channels.”

NAB also noted that it publishes its SLAs on the NAB Broker portal on a daily basis.

Ms Triandos concluded: “We want to make the experience of buying a home simpler for all our customers and support them with the confidence of an approval as quickly as possible, regardless of channel…

“We recognise the essential role of brokers in helping Australians to buy their dream home and will continue investing to speed up our processes to better support them and their customers.”

Westpac

How turnarounds are faring

According to the Broker Pulse data, Westpac’s average turnaround times have been consistently slow for the past year, not having come in at under 10 days since January 2020.

On average, brokers told Momentum Intelligence that between January-April 2020, Westpac was turning loans around in approximately 14 days. However, over the same four months this year, the bank’s average turnaround was up at 19.5 days.

Speaking during the bank’s interim results in May, CEO Peter King revealed that around 10 per cent of applications were being processed in 48 hours through the proprietary channel.

Why turnarounds are different

In April, Westpac CEO Peter King said that while applying directly with Westpac would result in faster approval times, he said there was no “inherent favour” for loans coming from direct borrowers, adding that “ideally [Westpac would] like both to be fast”.

He said the bank was “tracking the bifurcation”, but noted that the two channels produce different volumes and require different processes.

He continued: “I think we’ve also got to look at our process to approve the mortgage. So, how can we improve the processes? I think we’ve put in lots of checks and balances for responsible lending. Probably on the verification side, we had too many checkers, so we’ve got opportunities to speed up the time through having one check, not multiple checks.”

What they’re doing about it

Speaking in May, Mr King acknowledged that Westpac needed to get better at delivering approvals to the third-party channel, stating: “Service is hurting us, particularly in the Westpac brand in mortgages.” 

“We recognise we have to do better on service and we are confident we can.”

He said the bank was “renovating” its mortgage process and “really looking end-to-end”.

“We are resequencing the order; we are changing policies where they haven’t made sense,” he said.

A spokesperson told The Adviser: “Westpac is committed to improving our systems and processes to help mortgage brokers better meet the needs of customers. 

“We have made significant investments in upgrading our systems and technology and have hired additional staff in our processing and operations teams. 

“Mortgage brokers are important to our business, and we are committed to supporting them and making the process of applying for loans faster and easier.”

Find out more about the turnaround time issue – and what is being done about it – in the June edition of The Adviser magazine, out now.

[Related: Non-banks and non-majors continue to lead on turnarounds]

Exclusive: Major banks reveal how they’re fixing turnarounds
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Annie Kane

Annie Kane

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. 

Email Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

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