The power of prime

by Melanie Mingas26 Feb 2019

Mortgage House promises to take the pain out of loan processing through new tech tools for brokers. Australian Broker finds out more

THE finance landscape has evolved significantly in the last 30 years.

From the dawn of the digital age to the GFC and most recently a royal commission, the only constant has been change.

Having been present through it all, Mortgage House CEO Ken Sayer is now well versed in finding the opportunity in change.

When he established the company in 1986, he did so as a broker, and the firm’s first incarnation saw focus fall on mortgage management.

In 2007, Mortgage House made the transition to lending before pulling back during the GFC to focus on a new USP – the development of its technology.

In the years since, Mortgage House has invested heavily in developing a cutting-edge tech proposition and a solutions-based approach to lending.

The idea is to promote better outcomes for prime customers, and for brokers to outsource mundane administration work to a digital assistant that never takes a day off and always delivers on time.

The approach enables brokers to engage in the more meaningful elements of their role by employing a suite of digital tools, which also comes with the option to white-label.

“Essentially, I’ve been working all my life to get here, and now we are putting it all together,” Sayer tells Australian Broker.

“I am very close to the disappointing moments brokers have with lenders. I know the pain and suffering; I know the poor experience they have.”

To address its objectives, Mortgage House recruited Luke Vassallo, a former travel tech specialist who previously worked on systems for Flight Centre, Webjet and Expedia, to name a few.

He is tasked with driving the development of the lender’s digital tools as its head of technology and business solutions.

“Our claim is not that we are better than any one bank; we just have the single-system approach which helps us create efficiencies” Ken Sayer, CEO, Mortgage House

“The parallel between the tech and finance industries is quite interesting,” Vassallo says. “

 

In travel we saw a shift from bricks and mortar travel agencies to everything online. It’s similar here, but the label is fintech.”

All technology is developed in-house in line with the business’s core values, with specialist vendors brought in when needed, mostly for consultancy on the user experience.

The idea is to create an economic edge by avoiding adoption of the legacy systems that hold established lenders back.

The soft launch is scheduled for March. “Every financial institution has anywhere between 20 and 40 systems, and none of them talk to the other. We just have one system,” Sayer explains.

“Our claim is not that we are better than any one bank; we just have the single-system approach which helps us create efficiencies.”

A to Z of automation

The transition to a tech-based application and management process has taken less than three years, meaning all applications are now electronic, documents can be uploaded, and accounts can be linked.

The focus for this year will fall on rolling out the infrastructure to provide rapid approvals under the mantra ‘in by 12, out the same day’.

“Little things like that allow us to differentiate from the rest of the market,” Vassallo says.

“This business is all about scale, and we need systems to support scale and growth so we apply lessons from the travel industry. It’s uncanny that we used to scrape airfares from airline websites before the airlines used APIs. Now, for example, we can scrape bank accounts.”

The single-system approach employed by Mortgage House means intelligent decisions can be made easier and faster, accelerating the service provided to customers and readjusting the effort-to-outcome ratio for brokers, without forcing them to outsource or automate their operations.

These are natural developments for an industry experiencing its digital dawn, but they aren’t entirely new.

According to Vassallo, there are many parallels between travel and finance and, as such, many lessons the finance industry can learn.

“A loan is a big part of your life, and there are lots of opportunities for us to connect with our customers at all times, so you know what their saving patterns are, if they have paid off their loan, what they spend their money on, and so on,” Vassallo says.

“We want to provide a one-stop shop and be with them through their whole journey.”

Reporting that there are “some really cool features” in the pipeline, Vassallo reveals that there will also be scope for developers to build apps based on the Mortgage House platform.

Back to basics

It could be argued that now is not the time to launch a new prime lending solution that is dependent on brokers and A-grade borrowers, but Sayer argues to the contrary. “The timing is spot on,” he says, and GM Sean Bombell agrees.

“Banks are tightening up, and I think the broker community needs another player to help them through this next phase” Sean Bombell, GM, Mortgage House

“Banks are tightening up, and I think the broker community needs another player to help them through this next phase,” Bombell adds.

However, while the royal commission has given rise to multiple non-banks specialising in near prime, that is not a space Mortgage House intends to play in.

“In our eyes, the prime borrower hasn’t changed.

It might have changed for the big banks, but we are looking for the same customers we were 12 months, two years, three years ago,” Bombell says.

“We have accelerated the push in the broker channel based on what’s been happening in the marketplace with responsible lending, the tightening of credit, the royal commission.

That was the catalyst for us coming back to the broker market.”

The next piece of the puzzle is risk-based pricing.

Mortgage House has used this approach for seven years, and considers everything from LVR to employment to create an accurate rate.

The approach even goes as far as to have an ‘Essential Employer’ list, which names the ASX-listed and government entities that, theoretically, employ the lowest-risk borrowers.

“The broker community is very mature, and they know what their customers are all about, so it’s basically turning that philosophy into solutions-based lending,” Bombell says.

“It’s not one size fits all, it never has been, but some lenders are trying to have that approach and it just isn’t going to work.”

With new developments scheduled throughout the coming year and conversations with aggregators ongoing, broker originations are set to comprise up to 15% of total lending in 2019, with further targets to ramp this back up to the 60% that was ballpark prior to 2007.

Sayer says, “You know how in an organisation you think you know it all, but you don’t really know it all until you speak to your customers? We want to spend a lot of time with brokers making sure we have the value proposition right.”