FCA in talks to overhaul mortgage applications

FCA in talks to overhaul mortgage applications

The founder of online mortgage broker Trussle is in talks with the regulator about creating an industry standard for mortgage documents.

Ishaan Mahli, who founded the online broker in 2015, believes standardisation would lead to greater efficiency during the application process and better outcomes for the borrower, while eliminating biases towards lenders with a more simple process.

Although talks with the Financial Conduct Authority are at an early stage, Mr Mahli said such a standard would be applied across the whole market – including more niche areas such as self-build mortgages.

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The plan would involve standardising the amount of time for which documents are required for certain cases - for example, three months’ payslips - as well as the document format.

It could also involve harnessing Open Banking technology – an online communication standard that will enable the secure sharing of customer information with third parties such as lenders. 

The technology could be used to ensure data is provided from a credible source, rather than requiring the borrower to submit the information alongside supporting documentation.

Mr Mahli told FTAdviser: “There's an unnecessary inefficiency in the way mortgage applications are packaged and submitted, which varies wildly from lender to lender. 

“From the borrower's perspective, it makes it harder for a broker to provide an accurate indication of timeframes or even submission information required before identifying a suitable lender. Uncertainty is the last thing a buyer wants when making what's often the biggest financial decision of their life.

“From a broker's perspective, it adds complexity to developing a more consistent and efficient process, in turn giving rise to human error and delaying the time to deliver value to the end user.”

As an example, Trussle pointed out that for a first-time buyer in full employment, Halifax requires the latest payslip only, Nationwide asks for one month’s payslip, one month’s bank statement and proof of deposit, while NatWest requires one month’s payslip or one month’s bank statement showing income.

Mr Mahli continued: “Anecdotally, we know this also creates biases towards those certain lenders that have a simple or quick application process, possibly discouraging best customer outcomes.

“Our discussion with the regulator are in a very early phase, but it's been encouraging to see other areas - from industry to consumer groups - support this idea of standardisation. We're looking forward to sharing progress as it happens.”

The FCA said it would not comment on the discussions at this stage.

However Mr Mahli's plans have been met with some scepticism.

Oliver Marley, mortgage adviser and head of research at London-based Independent James, said while the standard sounded like a good idea, he doubted it would work in practice.

“If you were just asking for one month’s payslip, it might make things easier – but does that reflect the client’s income? Quite often, if it is shift work, it can be 30 hours one week and 20 the next.