The UK mortgage market has entered a period of great volatility.
Geopolitics has raised inflation and interest rate expectations, with lenders responding to the Iran war first by pulling more deals, then by engaging in devaluations a few weeks later.
With the prospect of a cooling housing market, not to mention stagflation and ongoing global conflicts, first-time borrowers are nervous, and lender behavior is unpredictable. The race is on for mortgage brokers to close deals quickly and efficiently, while the 1.8 million loans due to mature this year are ramping up their workload.
Adding to the pressure, lenders are competing fiercely to shorten the standard 150-day period from acceptance to the entry date.
In this tense environment, mortgage brokers need to pay attention to old credit pitfalls, as well as new issues that could damage their bottom line and reputation.
Administrative errors
Mediators interact with their clients, lenders, insurers, and attorneys, many times, and must comply with strict rules and regulations.
Simple mistakes with data are easy to make but can have big consequences. For example, an incorrect address or house number when submitting claims may seem like a simple fix or a minor mistake, but this could have devastating consequences for your client if they need to make a claim on their policy.
Another common management pitfall is the failure to record important discussions or otherwise accurately document what was agreed upon. Mortgage brokers need to not only follow customer instructions but be able to prove that they did. As well as evidence of negotiations, a simple follow-up letter explaining what was agreed is essential. Claims from mortgage borrowers who insist they never wanted them are common.
Like businesses, the most hassle-free real estate agents are those who have enough back office support to ensure they are on top of day-to-day operations, even during times of high pressure or increased activity.
Use of AI
Real estate agents, like many businesses, are experimenting with AI to increase efficiency, but they should be aware of the potential risks. It is important to note that AI can be useful when helping with daily tasks, but problems cannot be avoided if it is used to replace human technology, without monitoring its output. It is important that the most important qualification reports, which include a formal record of the advice given, are reviewed by real estate professionals to check for accuracy.
Any company that uses AI within its day-to-day business should have a usage policy that must be disseminated and followed by all employees. Firms should also be aware of their client data and how open AI models use this. Using open-model AI systems where data subjects have not given their consent creates AI liability risks.
As with any business, the use of AI must be properly governed and monitored.
Mistreatment of vulnerable customers
The FCA’s Consumer Duty has introduced new requirements for dealing with vulnerable customers, and embedding the 2023 regulation remains a regulatory priority. Real estate agents must have procedures in place to identify at-risk clients, monitor changes in circumstances, communicate their findings to those who need to know, and adjust the support they provide accordingly.
This may mean, for example, sending additional documents, or calling the customer instead of relying on email. Consumers also need to demonstrate that their advice is well understood. Absence of important documents such as a signed eligibility letter or explanation record is a major cause of complaints upheld by the Financial Ombudsman.
This also applies to customers with complex circumstances, including self-employed and mixed income borrowers. It is important for sellers to gather complete evidence about the borrower’s situation, and to ensure that the borrower understands the financial decision they are making.
Finally, the risks facing mortgage buyers are nothing new, but the current situation increases both their opportunities and their costs. Small process failures, unexamined reliance on technology, and gaps in supporting vulnerable customers can quickly turn into significant liabilities.
Brokers who take a disciplined, well-structured approach to underwriting, monitoring, and understanding customers are better positioned not only to avoid claims, but to protect both their customers and their long-term reputation.
Shriya Patel, an underwriter at Collegiate Underwriting
