As we storm into the new financial year and start setting ambitious targets for FY20, it’s all too easy to get lost in the metrics of leads and settlements as Key Performance Indicators.
What happens in between these two milestones is more important than ever to achieving success in your broking business. Some recent easing of serviceability benchmarks provides some welcome relief, but we are still expecting the tight credit assessment standards of FY19 to continue over the coming 12 months.
So with keen-eyed assessors more often than not looking for reasons to defer/decline instead of approve, it’s a great time to start measuring your application efficiency – how many of your submissions are actually approved? How many are approved the first time they are picked up by an assessor?
The results of our most recent round of efficiency audits showed some consistent, avoidable inefficiencies across a number of diverse broker businesses. The resounding learning I’ve had is that the submit-it-and-see strategy doesn’t work like it used to and ends up creating a lot more hassle for brokers and clients in the long run. Here are the top 6 things we found to help improve the likelihood of a first-touch loan approval:
1. Undisclosed liability checks
Far too many applications we analysed were returned with assessors wanting to clarify the outcome of credit enquiries. With access to up front credit reports, this is a pretty easy one to address – line by line commentary on the outcome of every enquiry will prevent your client’s approval being delayed.
2. Bank statement analysis
One of the biggest value-adds your VA can provide to your pre-submission process is to scour through bank statements to categorise living expenses, identify inconsistencies with client estimates and flag any other potential undisclosed liabilities. Almost 40% of the avoidable delays we saw on loan approvals in June could have been prevented with a stronger bank statement analysis. Needless to say, we have developed a fairly robust system for this analysis which all our VAs can be trained on.
3. Seriously detailed submission notes
Assessors used to pick up the phone and call the broker to clarify little things about the applicants’ circumstances. These days, it’s far more likely they will push out a deferred letter seeking clarification, creating a week of back and forth replies and waiting in assessment queues. We’ve noticed recently that most assessors are actually reading submission notes and the more detailed, the better. Things like line by line commentary on living expense categories, not unsuitable justifications of selected products, commentary on Afterpay/Zipmoney liabilities and detailed exit strategies are the most useful notes to include.
4. Minimum v. Comprehensive supporting docs
This one definitely goes against the grain compared to most brokers’ processes. I was always taught to only provide the bank their minimum required documents for fear of opening up a can of worms when too much information is provided. My sense is that most brokers are the same, but this approach doesn’t lend itself well to an efficient process these days.
The minimum supporting document checklists (particularly when it comes to bank statements) are frequently insufficient to secure a first touch approval. Assessors – granted the discretion to request additional supporting documents – are exercising their right to request transaction and liability account statements. If you’ve done the above 3 steps as part of your process, then you should feel confident that providing these additional documents up front will do more good than harm.
5. Delay lender selection
Every broker has their preferred lenders to deal with and has an idea of which lender will be suitable for a client in their early interactions of the sales process. Resisting the temptation to offer specific solutions to a client until all supporting documents are received will give you a much better chance to secure a first touch approval. Our audits have shown that most occurrences where loan files need to be re-worked with a different lender could have been avoided by delaying the lender selection up front.
6. Credit appetite hyper-awareness
Building on this delayed lender selection is having a real-time understanding of credit appetites across your preferred lenders. Policy documents alone don’t give the comfort they should anymore, so having your finger on the pulse is crucial. Lenders are dynamic in their approach towards applying policy as well as the internal top-down directives of how stringent the assessment should be. Something as simple as calling your BDM pre-submission to check whether they are ‘open for business’ or asking for their gut feel on a scenario is a great start. Participating in broker forums such as our new VA Platinum client Facebook page is another way to build this awareness and learn from other brokers’ success or horror stories. Of course, your VA will have a good sense of which lenders are the flavour of the week based on their VA group chats, so you should feel comfortable getting their input here as well!
What do you think? Are loan files going around in circles because you haven’t updated your process to reflect the current lending environment? Could your VA help you build a more complete loan file up front? Share your thoughts below or book a chat with me to discuss how we can help improve your process.