Automating broker loan assessments ‘on the priority list’: ANZ

Mr Elliott has previously said that it takes between 10-12 days in the broker channel but can be as low as an hour when direct. However, according to Momentum Intelligence’s Broker Pulse survey for March 2021, brokers said that ANZ’s turnaround times stood at 16.4 days, down from 18.2 days in December 2020, 19.7 days in January 2021, and 16.7 days in February 2021.

Indeed, while releasing the results this morning, it was revealed that, at the end of April 2021, the time to first decision for brokers and mobile lenders could be split into broad categories:

• simple deals without lender’s mortgage insurance (LMI) at 12 business days;
• simple deals with LMI at 19 business days; and
• complex deals at closer to 30 business days or longer, depending on complexity and rework required (all based on the 90th percentile).

Why broker loans are taking longer

According to ANZ, the differential in turnarounds is due to the fact that broker and mobile lender originated loans are manually verified and assessed, while two-thirds of branch applications are auto-decisioned once documents are submitted, “meaning customers who walk in with all the right documents can leave the branch with a decision that gives them the confidence to bid on a property”.

Speaking on Wednesday morning, Mr Elliott conceded that “challenges remain in Australia with home loan turnaround times, particularly in the broker space, given the ongoing growth in applications”.

He said: “While we’d almost doubled our assessment capacity, the new business we attracted regularly exceeded capacity. 

“That means our assessment service levels in recent times have not been where we need them to be. 

“We know we need to improve, and we’re investing in all stages of our processes.”

According to Mr Elliott, increasing the use of automation “will be a key factor”.

“The benefits of automation are best highlighted by how we assess applications through our branch network, where two-thirds of decisions are automated and customers are receiving a first decision on average within two days,” he said.

When asked by The Adviser why broker lodgements were taking longer, and whether they could also be automated, Mr Elliott replied: “Yes, it’s possible. But let’s not forget that when a customer comes to a branch, generally, we’re talking about people we already know; these are people who already have an account [at ANZ]. 

“People who come to ANZ and ask for a home loan typically already have a relationship with us, so we already know them. So, our ability to analyze and look at their payments and figure out the rate etc, we can automate that really quickly. Our systems can literally walk through [their] bank account, read all of that ... much faster. It is inherently much more difficult to do that for somebody we don’t know, and typically broker channel [customers] are people we don’t know.”

The CEO continued: “If you’re coming through a broker … we need to manually assess that loan and that means we need people to go through the bank statements asking you questions, looking at your credit cards, understanding your monthly expenses, your incumbents etc. 

“I’d be the first to agree that it takes too long. 

“Can it be automated [for brokers]? Yes, it can for ‘plain vanilla’ [loans], and, historically, we haven't invested enough in that. That’s the short answer. So, that’s exactly what’s on the priority list at the moment.”

‘Not a Machiavellian plan’

Mr Elliott added that while “some brokers have implied that it’s some sort of Machiavellian plan of ours or other parts of the industry” to delay turnarounds, he said that was not the case.

“It’s not really about brokers versus the banks. It’s really just about customers we know versus customers we don’t. And that is ultimately the challenge that we have. 

“Responsible lending legislation makes it harder; when we don’t know you, we have an obligation to make sure we understand your financial position. And, if we don’t know you, we will take time to ask those questions. 

“But yes, there is an opportunity to automate it, and that is exactly what we will be doing.”

Mr Elliott told The Adviser that the bank was “confident” that it will see its first set of improvements in “the latter half of this financial year”.

“So, in the second half of ’21 we will start to see improvements,” he said.

The ANZ CEO concluded: “The other thing I’d say on this is, in general, none of us [banks are fast in approving loans]. 

“Yes, we are too slow, but actually we’re not out of line with the market in general... we are all too slow. And the reason is that the volumes are unprecedented. We have not seen sustained high volume like this ever before. 

“When we built our machine, it was never envisaged that we would have to cope with this sort of volume every day of the week... none of it; broker or branch. And that’s what really set the whole industry back.”

How ANZ’s loan book has fared

The half-year results show that it provided around 92,000 new home loan accounts since 1 October 2020, lifting ANZ’s position to the third-largest home lender in the market (14.4 per cent as at March 2021).

Its loan balance was $281 billion at March 2021.

Over 40 per cent of its flows in the first half were for fixed rates, the bank revealed, noting the low interest-rate environment.

The bank added that there was strong growth in both the owner-occupier and investor segments.

Forty-two per cent of all retail sales in Australia, including home loans, are now through digital channels. 

“Looking ahead, we expect growth to moderate in the second half as customers pay down their debt faster,” Mr Elliott said. 

“This is good for the economy and good for our customers. It’s equally critical in helping customers ‘own’ their home faster. 

“As we look further ahead, we would expect slowing population growth will begin to have an impact on demand in Australia and New Zealand.”

The bank suggested that its growth had been a result of its “home loans recovery effort focused first on credit policy to ensure we were applying it consistently and clearly at all times and that our credit settings were indeed delivering the intended outcomes”.

What the bank is doing about turnaround time delays

However, Kate Gibson, ANZ’s home owners portfolio lead, and John Campbell, home loans tribe lead at ANZ, added in a joint update: “Well-intentioned conservatism had, at times, resulted in decisions taking longer than needed, slowing down the time taken to progress applications.

“Our credit policy settings and competitive pricing – especially on fixed rates at a time when customers were demanding greater certainty in their repayments – enabled our home loan book to grow $16 billion (6 per cent) in the last nine months of the 2020 calendar year, resulting in a calendar year market share performance of 1.9 times aggregate system growth.

“However, the high application volume brought its own challenges. Sustained higher flows in 2020 meant that while we’d almost doubled our assessment capacity, the number of new deals exceeded our regular capacity. That means our assessment service levels in recent times have not been where we need them to be.”

They continued: “We acknowledge the situation is challenging and that we need to improve to meet the expectations of our customers, lenders and valued brokers, recognising we are in a buoyant property housing market with lending indicators at historic highs…

“It is important to our organisation, as a trusted partner for our customers and lenders, that we reduce our times to make decisions and reduce the relative timing difference we see between channels. 

“Our operations teams are fully committed to reducing our turnaround time, and we have hired over 80 new assessors this financial year alone and are leveraging other resourcing to assist with processing activity.

“We also know the only way to ensure we have robustness in our process, allowing it to flourish at times of peak volume, is automation. 

“We are investing in all stages of our assessment processes: document collection, triage, verification and decisioning, with the outcome being higher rates of auto-decisioning in targeted segments and improvement in times to decision across the board.”

They concluded: “Notwithstanding these challenges, however, the turnaround and ongoing momentum in our home loan business has been one of the success stories in our half-year result.”

[Related: Associations call out majors for turnaround channel conflict]