Here We Go Again?

Industry Press headlines continue to make depressing reading for those involved in the mortgage sector.  We hear that arrears and repossessions are up; interest rates have continued to rise with more hikes predicted; lenders are cutting back on procuration fees and lending scheme criteria is under scrutiny.  Funny but I am sure I have seen these headlines before.  Oh! yes it was during the early 1990’s when the UK mortgage market almost met its Waterloo.Unfortunately the mortgage industry does have a short memory and what’s more seems disinclined, to put it mildly, to learn from past mistakes.  I have the dubious distinction of having worked for a lender during the late 1980’s and early 1990’s that had to merge due to some creative but ill advised lending resulting in some impressive and financially suicidal losses.  I then spent two very busy years auditing a large number of major lenders on behalf of some very peeved MIG insurers.  ‘Poacher turned game keeping’ was a phrase I seem to remember being mentioned on numerous occasions.  It was without undoubtedly the most illuminating and depressing, yet financially lucrative period of my mortgage career to date.  We often hear today about the problems caused by self cert and non status lending and how the subprime lending sector is out of control.  These were also hot topics of conversation 15 or so years ago.  It would seem that pressures within the industry now are exactly the same as they were in the 1990’s.  Lenders need to lend and the more you lend the bigger you become it would seem.  Or so the theory goes.  Sales staff and underwriters were and probably still are under enormous pressure to lend, lend and lend some more.  Having been a participant, however unwillingly, myself of lending targets I can understand how the industry is starting to slide back again into the mess of the last decade.  We aren’t quite there yet but things need to change if we are to avoid the traumas experienced then.One of the major issues of the 1990’s was the general lack of information available on clients and the transaction.  Credit reference data was available but could be and often was routinely overridden in the interests of hitting targets.   Valuers did adjust valuation results based on the need of branch managers to hit their targets.  I have been guilty myself of using strong arm tactics on valuers who would very much like to continue receiving instructions in the future.  Having waded through hundreds of mortgage files during my auditing days I can attest to the general lack of care and attention applied to loan processing and underwriting in the past.  What was most significant was the general lack and in some cases total absence of information on which to base a sensible lending decision.  We have no excuse today for such a tardy approach to client and transaction assessment.   The information available in this modern electronic age means both those providing client advice and those underwriting loans have the ability to fully understand the basis on which a loan is to be advised upon and ultimately granted.  As a purveyor of client and transactional information in the form of Verifi Solutions I can say categorically that the industry should never reach the depths it has in the past and if it does it has no excuse for doing so.  So, although the headlines make depressing reading as long as those in the driving seat utilise the services and systems available today the current downturn will be temporary with few long lasting effects although hopefully unlike in the past with some long lasting memories and experiences on which to base future decisions.