Paul Crewe, managing director of Smart Money, discusses the fusion of human and machine in terms of underwriting and sourcing.
Having read through my last blog entry, I probably came across as a little too loudly optimistic about prospects, as most of us were still recovering from New Year celebrations. But I shall make no excuses for loudly proclaiming how good it is to see the second charge sector settling back into a rhythm that should see the sector outperform its record breaking figures from 2014.
It is worth remembering for all those who recall the market as being a whole lot larger before the credit crunch in 2007/8 – quantity is not everything. What is so good about the way in which we are all building the sector, is that this time it is based on sustainable supply and demand as well as a strong underwriting stance to which all the lenders, certainly the ones we deal with, are adhering to. Of course, full integration into the regulatory framework next year is concentrating the minds of the great and good among the lenders and distributors, but I think the lessons of uncontrolled growth with a rush to the bottom of the credit curve have no place in a modern lending market.
I would like to return to a theme, which is also part of a larger dialogue in the whole specialist lending field. The subject is technology versus human experience particularly in an underwriting and sourcing context. Among the first charge lenders we have seen how an overreliance on a credit score can end up with a great many borrowing refugees, looking for help outside the high street. At the same time, lenders who rely on the experience of their human underwriters are providing a much needed safety net for the growing numbers who are finding themselves shut out of the high street.
Also the proliferation of sourcing technology not just in first charge but also second charge, commercial and even bridging brings about a different set of challenges for today’s broker. With many lenders committed to their technological underwriting, it is ironic that sourcing engines are more rather than less likely to fail to provide the right answers when no matter how well the criteria are programmed no one has access to the exact algorithm is using to generate a yes, no or maybe.
In the second-charge market, because of the nature of many of the circumstances that individual clients have, sourcing engines represent at best, a way of filtering out the least appropriate alternatives. But there is still no substitute for the experience, knowledge and strong relationships that are the hallmark of the human talent available to intermediaries among the specialist packager community for providing the closest matches and seeing the case through to a successful conclusion. To my mind, technology is a valuable tool for comparison purposes and filtering and is faster than a human being, but give me a human interface to provide the fine tuning and accuracy necessary for final choices. Perhaps a fusion of the human and the machine lies in the future.