Dudley Building Society believes that general underwriting has “lost its way” under the dual burden of trying to eradicate perceived excesses of past lending practice and negative interpretation of the regulator’s consultation processes.
While the mutual sector is increasing its share in the lending market, due to its use of manual underwriting, the Midlands based intermediary focused mutual’s chief executive, Jeremy Wood, says there is a danger that high street lenders, relying on their computer generated scoring models, are creating ‘no go’ areas among certain classes of potential borrowers.
He said: “The overhasty withdrawal of interest only, the restriction on older borrowers and the tick box mentality being seen on cases that do not meet every part of the lender’s matrix are symptomatic of a part of the industry, which has lost its nerve. In trying to eliminate risk by homogenising the underwriting process, current lending policy in general has left swathes of potential borrowers out in the cold. We are not talking about bad credit risks, we are talking about good quality cases, on which a good underwriter can make logical and positive value judgements.
“The mutual sector has been able to offer some much needed sense of balance over the past two years, because we are looking to find reasons to lend safely, rather than the reverse. At the Dudley, our analysis, based on conversations with brokers and our distributors, tells us that the wider intermediary sector is getting tired of having to submit cases to high street lenders because of the keen pricing on offer, only to find that, as they suspected, the lender in question was only ever interested in cherry picking the low hanging fruit. This is one of the major reasons why we have an unbalanced lending market.”
