Advisers round on self-cert ban proposal

Lie to Buy is dead - hurrah

Lie to Buy is dead then...well good riddance; this removal of self-cet won't prevent those who 'deserve' a mortgage from getting one...I am sure lenders would accept tax returns as proof of income streams for those in self employment; just means that they'll have to pay tax on their drawings, rather than dress the income up as something else to evade tax. Shoddy practice and time to move on.

Posted by: George

Mr

I agree with George, B2L and self certification are forms of money laundering and although not responsible for the downturn, banks have that title, deserve to be shelved. Why can a self employed person not prove income? It has always been a mystery to me. Whilst reviewing the situation, the FSA should ban fast track as well. The mortgage industry needs cleaning up and we should all take the lead by ensuring compliant practices, even if the lenders do not request them.

Posted by: Denis

Self certs

The sound of gates crashing after the horse has bolted is deafening. A real sense of proportion is required, something the banks have long booted into the long grass, in order to satisfy all comers. Banning self certs now will mean a large number of good mortgagees will be unable to re-mortgage when they have to due to the short termism of money lenders.

Posted by: Andrew M

Mr

If the FSA accept that Self Cert was designed for Self Employed and not Employed then why not just make Self Cert unavailable for Employed people. The FSA previuosly gave the judgement about when a Self Cert could be applied for and, apart from the usual type of suspects, all good advisers have followed the previous FSA strictures. In the commercial market, the Government would guarantee an application for an unsecured business loan, on the basis of credit, experience and a good business plan. So why the difference.

Posted by: Chris

Mandelson knows about Self Certs

Baron Mandy Mandelson knows all about Self Certified mortgages. Perhaps as Business Secretary and confidant to Cash Gordon (father to the FSA) Baron Mandelson was able to advise the FSA about how a governemnt minister can show mortgage advisers a thing or two and Britannia Building Society applications and in particular to the Britannia ! You may recall Mr Mandelson failing to disclose the small matter of his constituency property at Hutton Avenue, Hartlepool, or his mortgage on the property, either during the initial discussion with Britannia or at any other time of his mortgage application. If the FSA plan on a retrospective witch-hunt could Baron Mandy Mandelson be first in line?

Posted by: Simon Mansell

Equality

I have no problem with the banning of self-cert mortgages so long as self employed people are given a fairer basis of income calculation. Why does a self employed person have to prove 2 or 3 years income when an employed person can make do with a couple of wage slips. How is it fair for an employed person to have the whole of their earned income taken into consideration (from P60 or gross salary) when self employed people have to work off net profit figures. Self employed people must still be allowed to acquire mortgages because the self employed entrepeneur drives an economy forward by using equity to fund and grow businesses. If this line of funding was outlawed where would that leave the future growth of the country.

Posted by: Small time

Mr

The current economic crisis was caused by reckless lending in America which was disguised as prime business and sold on to banks too lazy to check what they were buying not UK self cert mortgages. I think there are only two banks now offering anything like a self cert mortgage so banning these now is pointless it will make no difference. Banks introduced self cert mortgages about 12 years ago because it realised that there are many people in the population who find it difficult to provide income verification but have very good financial history and good levels of equity in their properties. Today there are many more people in this situation. If these loans had been proved to be irresponsible and unaffordable the default rate would have rocketed and the banks would not have continued to offer these products over such a long period. The current knee jerk headline grabbing mortgage proposals by the FSA will hit the self employed small business owners who generate most of the wealth and employment in the country. If you are a business and decide to invest in your business, employ more people, increase sock levels, move to bigger premises or just retain profits in the company you may no longer be able to get a mortgage. A huge part of the UKs growth over the past 15 years has been built on the ability to obtain credit now when we need to pull out of recession is not the time to start chocking this off. Strangely as it may seem I do not like self cert mortgages because they require the applicant to state a figure that they earn on the basis that the lender will not check it. This basically takes away the responsibility from the lender to access affordability and encourages the applicant to lie. A much better way would be for the lender to have a wide range of lending criteria to meet which could be assessed by way of detailed income and expenditure breakdown, bank statements and a personal detailed explanation for the lending. With this information lending could be justified and a much better assessment made than using accounts figures based on trading from 3 years ago.

Posted by: David

Read the B**ody thing first

The FSA CP09/03 on the subject is about 118 pages long and is available to download from the FSA's website. I have done that and printed it ready to read. Can I suggest before commenting everyone reads it first as a I suspect many of the comments have been made BEFORE reaidng it. That;s not to say the FSA itself is any better as I have something they have discounted out of hand without even reading, but that is because they THINK they can tell us what to do when they cannot.

Posted by: Phil Castle

self cert

The problem is that self employed people in a small buss amny items go through their accounts including depreciation of cars/vans. Also lenders dont take into account full income from many others ie working families tax credit etc until they do we have a problem ALSO can someone advise how Mr Blair got such large borrowings based on their income I have been told it was based on future income what a load of cra-

Posted by: R Lundon

Moment in time

An income check is a moment in time. Mortgages can last 25 years. So what does an income check tell us about ability to service a long-term mortgage? Nothing. If a borrower is prepared to invest 30-40% of their own money in a property then income should be of no concern to anyone. If the debt is not serviced the property is repossessed and the lender walks away with the profit.

Posted by: Ken Durkin

FSA blunders again

Another short sighted, little thought out regulatory blunder which may lead to may millions of self employed people being unable to raise mortgages. A few of points to consider 1. Many self employed people or directors of small family businesses raise money secured by their residential property to expand their businesses, consolidate expensive short term loans and to create working capital for future growth which would all lead to higher net profits. By self certifying their projected income they are able to achieve the increased levels, however without a self certification facility all these people would be rejected. 2. When a new company begins, the first years accounts are normally prepared about 10 months after the end of the first year (i.e. 22 months after the business starts). Without a self certification mortgage none of these self employed people will qualify for a mortgage for up to 4 years after commencing the business (as many banks require three years net profit), whereas their employees will all be able to apply for a mortgage using just a few months salary slips! 3. Although the business owner would be the last person to qualify for a mortgage under a regime which bans self certification mortgages as above, he is quite likely to be earning more than his staff and in the event that the business fails he will always be the LAST person to lose his job. 4. Since the 1980s a substantial number of people have started businesses and bought or raised money secured by property using self certification mortgages creating and redistributing enormous capital wealth throughout the UK economy. Do we really want to penalise the small business owning entrepreneurs who have contributed so valuably to this open free market economy where effort, hard work and some speculation can achieve success for everyone. Do we want to revert to the bank underwriting practices of the 1970s and before when we were predominately a nation of employee tenants who had little interest adding value to their jobs or their homes as that value was rarely shared with them

Posted by: Michael Thommes

Self cert mortgages

I understand the lively debate regarding the FSA but, for the self emplyed there are issues:- For an employed person motor expenses, some heating and lighting is used by the lenders as part of expenses and therefore a reduction in lending however for the self employed who clain for motor expenses, some heating and lighting, that is never added to the net profit figure. There are inequalities that should be addressed. The self cert was designed for self employed people and they took a very resposible view of what thay could afford, unfortunaely this was abused by certin brokers and we have arrived at were we are. One other point is that if the self employed do show more income then I would have thought that HMRC might take more interest. This is called unintened consequences

Posted by: roger holloway

I Recall

I recall saying some time ago that mortgage reference requests had stopped asking how much the client earn't and therefore mortgage fraud was on the rise again !! Those responsible for money laundering offences should be put away as promised ! I am sure many of the self employed could afford these mortgages if the property prices had not been over inflated by false earnings. George I hope you pay tax on your profits not your drawings !!

Posted by: Spike

FSA & mortgages

Just another example of a "regulator" trying to regulate a market it does not understand. To label all self-cert loans as basically toxic is remarkably naive and is similar in analysis to the previous suggested criteria of three times income for all - an extraordinary lack of insight.

Posted by: Barry