FSA to ban fast-track and self-certified mortgages

[dipsydoodle]

Mortgage borrowers will find it takes longer to process their application and the self-employed could struggle to get a loan if proposals announced today by the Financial Services Authority are implemented.

The regulator has published a consultation paper which proposes requiring verification of borrower's income in every case to prevent over-inflation of income and mortgage fraud.

If implemented, this will prevent the "fast tracking" of mortgage applications – the granting of loans without requiring proof of income – a wide-spread practice among mortgage lenders.

David Hollingworth of mortgage broker London & Country says it could mean that rather than a mortgage being granted instantly – as often happens now providing the lender can find enough information about the borrower's credit history electronically – it could take up to three weeks for the borrower to find out if he or she qualifies for a desired loan.

http://www.guardian.co.uk/money/2010/jul/13/mortgages-fsa-fast-track-self-certified

The bit about the self employed is to a certain a load of old bollocks. They can easily use their tax returns to confirm income. If they've fudged income to reduce tax then fuck 'em anyway. I appreciate that cannot be used against those recently self employed who are only able to use bank statements for proof on income.

[TheBigotBasher]

1. Hey up

I have not been around much, a lot of professional stuff to catch up on. I have some mixed feelings about this. Firstly property prices are still way too inflated. Billions (not sufficient) have been spent on affordable homes then billions were spent on keeping homes unaffordable.

The key problem being massive over inflation of the London property market. Very few can buy in London if they declare their real earnings.

So this and the changes to HB in London (the caps only affect London in reality) will devastate property prices in the centre of London. I think this is a good thing. I'm not sure the Duke of Westminster will agree.

I'm not sure the buy to let lot will agree either. They have however had the advantage of the State helping them buy a multi million pension using what is in effect a crappy terrace house. Now they will have to fund a large part of that pension pot themselves.

[dipsydoodle]

2. Yes - its the "buy to let" crowd

who've greatly contributed to escalating property values. This change will prevent them from moving on and repeating the exercise with fresh mortgages because they'll be unobtainable without proof of income. If they default on an existing one that will make them mortgage proof anyway - our credit records are more comprehensive than they appear to be in the USA for example due to our CCJ system.

What's HB ? Can't think.

[dipsydoodle]

3. I've realised what HB is

doh.

[dipsydoodle]

4. Updates whine on the subject

Mortgage borrowers to be 'sacrificed' lenders warn.

Plans by the City regulator to restrict mortgage lending would "sacrifice" many good borrowers, the Council of Mortgage Lenders (CML) says.

The Financial Services Authority (FSA) wants to force lenders to be much more careful about to whom they lend.

It says the new rules are essential to "protect vulnerable customers".

But the CML says that if the suggested new rules had been in place from 2005 to 2009, about half of all mortgages would not have been granted.

http://www.bbc.co.uk/news/business-11468240

[muriel_volestrangler]

5. It just sounds like a return to the old system, to me

I haven't applied for a mortgage in the past few years, but when I did in the 90s, they wanted to know my income, my ability to pay the mortgage combined with other commitments, and pointed out what increases in interest rates would mean (whether there was a formal calculation, I can't remember).

But I can remember that one chain I was involved in fell through when the guy I was buying from, who was self-employed, was denied a mortgage for the larger house he wanted (their family was growing) because he couldn't prove his income to mortgage providers to their satisfaction. There was none of this "we'll assume everyone knows what they can afford, and take their word for it".

I suspect that a lot of the 51% of mortgages "that would not have been made" would just need a bit more paperwork and calculation, or some of them would have had to have a slightly smaller mortgage - so that house prices wouldn't have inflated so quickly.

[dipsydoodle]

6. That of course is the issue

at least to me it is. Self declared income for the purpose of obtaining a mortage is what helped stoke the escalation in house prices. Halifax were one the first to help run this scam - I recall a Panorana whatever documentary on the subject late ninities I think. The side issue then was what on earth would happen to the mortagees if interest rates escalated again. I hadn't at the time latched onto the re-insurnance aspect which of course ultimately contributed to the crash.

Wasn't the old rule about 4 x gross income max ?