How Technology is Changing the Face of Bridging Finance

Posted by Lendlord Digital Lender on 10th January 2022 -

The full magazine link: Bridging Introducer - March 2021

A reminder that Lendlord Bridging Online Lender is live with benefits to Lendlord users.

Here is the full article:

Whereas most lending decisions in the mainstream mortgage market are processed through automated decisioning models, the majority if bridging lending decisions are made by underwriters.

However, whether the ultimate decision is being made by a man or a machine, all underwriting processes need data. The big challenge is the collection of this data. It usually comes from a lot of different sources and can take a lot of time.

When providing finance, lenders will initially provide indicative terms upfront. After this they will perform the underwriting process, delivering a decision on whether or not they will be able to lend to the customer.

These indicative terms and interest rates will be usually be a predefined financial product, with pre-defined approval criteria that the borrower will need to meet.

In the current situation, without technology, it's very hard for lenders to adjust and change the loan terms and the interest rate online, and in real time, based on a specific customer and case profile.

However, here technology can make a difference.

Technology can help to streamline both the terms and interest rate generation and the underwriting phases of a transaction. When it comes to the indicative terms generation, technology can take a look at a specific case and at a specific profile and tailor make the terms online based on real time data collection from the customer.

When it comes to an online decision, the more data an engine has, the more accurate the terms can be and more the risk can be reduced. Data can include the current portfolio of a property investor, the specific case information that is currently available online and, of course, their credit history data. Here, Open Banking is changing the market, as customers can securely integrate their bank accounts, which can help them to achieve faster terms and a faster underwriting process.

The underwriting process can be streamlined as well by integrating ID verification technologies, automatic proof of address and documents verification, as well as Open Banking.

By combining these technologies, we can create a new way for property investors to get their finance in a much more streamlined way.

At Lendlord, this is exactly our vision, which we start to deliver with our new online bridging lender, which will generate heads of terms, online applications and case tracking as part of a fully digital process.

By making the lender available through the online portfolio management platform, it tackles one of the big hurdles in the underwriting process – gathering the data. Lendlord users who manage their portfolios using the platform will be able to quickly review their bridging options based on the data already held on their portfolio – and, as a result of this wealth of information leading to more accurate risk decisions – they will benefit from better terms.

This is actually how the idea to launch a digital bridging lender came about. We received questions from users who asked if they could get better terms from lenders if they keep their data up to date on the platform. We studied existing processes used in bridging underwriting and we realised that an automatic engine could analyse user data and suggest tailor made product rates based on their profile.

The engine works by considering an applicant’s property investment background and experience, personal profile and credit history, as well as their exit strategy and analysis of the property that is being used as security. The more information the platform has, the more data the engine can use to make a more accurate risk decision, and so there are obviously benefits for landlords who already have their portfolio information and historical cash flow within the platform.

The system can provide indicative terms in three minutes and it takes five days once all the relevant documents have been uploaded. However, it’s important to note that, while this is an automated process, and a decision in principle will be generated automatically, there will be an ultimate human approval before funds are released. We are not at a stage yet where release of funds can be approved and actioned without human intervention – and lenders will need to be comfortable with their own risk and processes before this becomes part of the market.

Watch our recorded webinar on our new Bridging Online Lender