With the introduction of the Mortgage Market Review (MMR) last month, the main challenge for lenders has been how to comply with regulation effectively whilst still delivering excellent customer service and retaining their competitive advantage.
With that in mind, how to efficiently evidence MMR compliance has been, and will continue to be, one of the key focusses for lenders over the next six months. Audit trails and detailed records will have to be kept to show that lenders are acting appropriately, with robust systems, controls and processes needed in order to manage the production and collation of these reports.
Within arrears management, one of the main factors in remaining compliant lies in understanding the individual circumstances of each customer. Following the MMR, lenders have to be able to evidence on request that they have made customers aware of all the options available to them, and that borrowers understand the product they have agreed to, as well as the responsibilities they have to make repayments.
It is in this area that third party software and outsourcing solutions can be beneficial. Suitable software used by suitably trained and managed teams can help to ensure consistent processes, strong controls and an audit capability, all in a cost effective manner.
It is important that collections departments establish comprehensive insight into each customer with the aim of truly understanding their individual needs. Here, a system that is intuitive to the user can help lenders overcome any customer reluctance to divulge information. Prompts and scripts are provided to help ensure that all the relevant questions and checks have been made in order for a full assessment to take place, with these records providing lenders with the foundations of a resilient case review process.
However, it is not just at the beginning of the customer journey that appropriate processes are important. There are other requirements which are not customer facing, such as ensuring that arrears charges are a ‘reasonable calculation’, rather than an estimate. As a result of this, lenders will have to carry out specific fee justification exercises to demonstrate that fees are both reasonable and fair. The administration associated with these tasks can be time consuming and challenging. Utilising an outsourcer who has a focus on activity costing can provide lenders with the support and transparency they need to meet the regulator’s demands.
As the regulatory landscape of the financial services industry continues to evolve, the importance of policy, process and procedure will continue to increase. Partnering with an experienced outsourcer is one way that lenders can ensure they are working within the regulatory framework, whilst at the same time operating in a time and cost effective fashion.
Find out about our Loan and Mortgage Servicing to support compliance in arrears management