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Interview

with the influx of customers calling for mortgage payment holidays. By crosstraining staff throughout the business to support the colossal effort, it allowed Masthaven, when other lenders couldn’t keep up with the high level of requests and had to pause business to manage them, to keep going. “We put 16 new people on the phones, trained them up, and picked up every contact that came in,” Jon tells me. “We monitored where calls were being dropped and made sure that we responded, and it’s meant that we’ve been able to balance the requirements of our existing borrowers—who we absolutely need to make sure we are there for in these difficult times—with customers coming through the new application and enquiry stage.” As a result, it was able to apply some of the teams in new ways and areas where there was more need. For example, it trained its business development team to be the first point of contact for these calls, as they were already well experienced in mortgage lending and had good interpersonal skills. The customers are then handed to employees who are experts in loan servicing and management. He says that, on a daily basis, it was going through lists of people, checking where everybody was at. This included identifying what they could and couldn’t do, the processes that needed to be safeguarded and tested, and which ones could be done on a separate timeline. To further adjust to lockdown, Masthaven reappraised some of its product range to make it simpler and more focused, so that it could continue to operate in the bridging, first-charge BTL, residential and second-charge mortgage markets. One way I have seen this is through the short and informative videos which have been published by employees on social media, to communicate exact changes in criteria. “The one area that we’ve felt that we couldn’t serve appropriately during this time, where we’ve temporarily ceased lending, is development finance—simply because you just can’t get a valuer or a QS out to site at the moment,” Jon explains. It is, however, working with its existing development finance projects to find ways to support those borrowers during this period. To remain active in the bridging space, the bank broadened the range of valuation services that it was able to offer. Before the property market was reopened by the government, Masthaven introduced drive-by valuations supported by an AVM with a maximum LTV of 60% on 6th April (plus other changes), although flagged it to brokers as early as 2nd April. The bank announced that it would use AVMs if the LTV was less than 50% [ed: since upped to 60%]. It was also able to reuse valuations

with an overlay of what the current market looks like; and, in some instances, conduct a full valuation where a property is vacant, or if there is an agreement between the valuer and the occupier. Jon believes that this flexibility has helped Masthaven when other lenders of its size decided to step back, and it was able to support brokers who found themselves with less options. However, he does admit that the crisis has identified the threats within the value chain and, considering valuations are so critical to the bridging market—where a lot of focus is on the security—those lenders who have in-house valuation or property assessment services may benefit more from the additional expertise. “It will probably mean that firms will look at what their exposure is to other third parties. As a bank, we have to look at things like operational resilience,” he adds. One of those reliance’s is where lenders get their funding from—and whether it is in fact committed. Jon believes that now is a good time to show intermediaries the real advantage of being a bank. He explains that retail deposit funding is a “tried-and-tested model”—and this is in addition to the £60m of equity investment it has from Värde Partners. “Masthaven has been able to continue to lend throughout the crisis, unlike many of the non-bank lenders which rely on the wholesale market for funding,” he explains. In addition to updating its criteria and adapting the way in which it works with third parties, it has also been able to continue lending due to its ongoing investment in technology. While banks on the high street have notoriously dawdled in their approach to technological advancements, specialists like Masthaven have been able to move with the market quicker. Although, if you take a look at the bridging space, a snail’s pace would be seen as swift. The latest UK Bridging Market Study by EY, compiled in January and February this year, showed that some 38% of respondents selected the ‘ability to use AVMs’, alongside 27% who chose the ‘ability to automate the underwriting process’, as the least important capabilities to continue as a successful bridging lender. Both of these categories were considered the least important in 2019’s survey, too, highlighting that there remained a strong opinion in the industry that automation and the adoption of technology was not vital to strong performance. The impact of the Covid-19 crisis, however, is very likely to change this. ID verification and document signing, for example, can all be digitalised. “These are all things that I think have moved on in other industries and other sectors of financial 18

Bridging & Commercial

services,” Jon claims, stating that bringing more elements online would be beneficial to the short-term lending market. Saying that, he believes there has to be a valid reason for implementing such innovations. The bank also has portals for savings customers, intermediaries and its new one for short-term lending. Designed to give brokers access to quick quotes, this latest addition is currently being tested in the most acute scenario. As a result, the MI that comes through the portal during this time will be extremely helpful for further innovations. Having released it ahead of the pandemic, Jon feels that they are “front runners” in the use of portal technology in this part of the sector. Alan—who is only just recovering from the virus himself—tells me the efficiency of the portal has been a “revelation”. Since coronavirus hit, around 180 brokers have signed up to use it. “The vast majority of the enquiries we are receiving … are all through the portal,” he confirms. He explains that it has sped up the issuing of DIPs during a time when things are typically taking longer. “Covid-19 is a terrible thing, but it’s enabled us to really test the portal in the most extreme circumstances,” he admits. “Who would have thought that it would actually turn out to be the way to do business, not just an option or an alternative.” Out of the brokers who have registered with the portal, 98 of them had never worked with the bank before. When it was introduced, new business applications surged by around 50% when compared with the already positive post-election January. In addition, through March—despite the fact that the lockdown measures kicked in later in the month—that trajectory continued. “It shows that it allows you to have a continuity of service that wouldn’t have been there otherwise,” Jon tells me. “As Alan said, we run a process whereby we make sure that, where a decision is referred to us, it’s responded to within the timeframe that we set. It’s allowed us to be much more consistent in our service levels, and we are certainly getting anecdotal and positive Feefo results … so we can see that the brokers are recording that.” Alan notes that this is the beginning of the portal’s journey and not the end, by any stretch. “So, the first thing we’ve established is that it works . . . it’s efficient and captures information more accurately. When things are settled down a bit, we need to say, ‘Right, we’ve proven in these extraordinary times that it works—how can we now make it even better?’ And there are clearly going to be things that, when we look back at it, we are going to have to improve and maybe add additional features,” he explains. “At the moment, it is absolutely pivotal to the

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Bridging & Commercial Magazine — Resetting the Balance