It may be something of a cliché these days but ‘Computer says no’ has become shorthand for when companies blindly follow policy without applying any common sense.
For those too young to remember, this originated as the catchphrase of Carol Beer, a popular character in the early-Noughties TV comedy, Little Britain.
When faced with any customer query — no matter how simple or reasonable — Carol would type it into her computer, before responding to the customer: “Computer says no.” This happened every time.
As a comedy sketch it was near perfect. But it also spoke to growing concerns at the time that larger companies were basing their decisions on data at the expense of good reason.
Underwriters no longer have the same autonomy
Little Britain ended nearly 20 years ago — and not a lot has changed. In fact, if anything, computers now make even more of the decisions that were once made by human beings.
In the mortgage market, the large high-street banks are often accused of adopting a ‘Computer says no’ approach to lending. That’s why a lot of the specialist lenders, in their marketing, lean heavily on the fact that they manually underwrite cases.
However, unfortunately the same is becoming true in the commercial mortgage market.
In previous columns I have written about the challenge of higher rates in this sector, and suggested what I believed to be sensible criteria adjustments. But, in truth, I think one of the biggest challenges facing the commercial mortgage market is the way lenders seem to have adopted a ‘Computer says no’ attitude en masse.
Holistic view
Don’t get me wrong — it’s important to have clearly defined criteria. Otherwise, how would you know what a lender was willing and unwilling to accept?
However, many lenders used to take a more holistic view of cases. Often, if a case didn’t quite fit the criteria, you could pick up the phone to your relationship manager and together you would find a way to structure the deal that would suit all parties.
I’d like a return to old-school underwriting, where each case is assessed on its merits and underwriters have the freedom to think creatively to make deals happen
That approach seems to have disappeared from the market. Underwriters no longer seem to have the autonomy that they used to have. ‘If it doesn’t fit the box, it doesn’t go through.’
I’ve lost count of the number of times a case has been delayed or, worse, fallen through because a lender has refused to budge over something relatively minor and inconsequential. For example, if slight repairs to the property are needed or if a borrower is in the process of applying for a permit where acceptance is a foregone conclusion, often you can’t proceed until everything is taken care of.
You may be thinking, ‘What’s the issue with that? Rules are rules. If you don’t have the permit, you don’t get the money. Simple.’
In most cases, I would agree. But there are times when a bit of flexibility and common sense is called for.
Many lenders used to take a more holistic view of cases
You could, for example, take retentions, or insist that the borrower puts interest cover in a bank account until all the conditions have been met. That creates an incentive for the borrower to comply.
And that’s the way things used to be done. In fact, those are pretty basic lending principles.
Swing of the pendulum
If that used to be the way things were done, the obvious question is: why has the pendulum swung so much in the opposite direction?
There are probably good reasons for the shift in mindset. But I get the impression that some of it is down to a lack of skill, experience and knowledge among underwriters.
These days, many underwriters cut their teeth in the residential or buy-to-let markets. Some of those skills are transferable.
But the commercial mortgage market is a very different beast. It takes years to build up the sort of understanding and expertise required to know how to structure a deal so that it satisfies all parties. Perhaps we are missing some of that experience in the sector right now.
A lot of the specialist lenders, in their marketing, lean heavily on the fact that they manually underwrite cases
As it’s a new year and the industry press is still awash with wishlists, here’s mine: a return to old-school underwriting, where each case is assessed on its merits and underwriters have the freedom to think creatively to make deals happen.
I’m not suggesting anything overly complicated; just a little common sense.
Given the challenges the commercial market is facing at the moment, that’s something it could desperately do with.
Lucy Waters is managing director of specialist finance broker Aria Finance
This article featured in the February 2025 edition of Mortgage Strategy.
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