Regulator's plan to amputate rather than cure is wrong
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I was interested to see that a recent report from Fitch Ratings states that fast-track mortgages do not pose any more of a risk than income-verified loans. I couldn’t agree more.
When it comes to self-cert, I accept that the performance of sub-prime with some lenders may have carried a higher risk but it was never the unmitigated disaster the Financial Services Authority would have us believe.
If you price for risk and ensure the security is properly valued arrears should be a manageable problem rather than something that leads to a lending crisis.
In short, a robust self-cert credit-repair product for the self-employed at a maximum LTV of 60% should work, and it will certainly be required. For prime borrowers the LTV could be increased to 70%.
Unfortunately, the FSA intends to regulate self-cert mortgages out of existence regardless of the fact that around one million borrowers who currently have such products are unlikely to miss a mortgage payment.
They are probably wondering what the hell is going to happen to them when their deals end. And as we come out of this recession some entrepreneurs will seek to capitalise on the opportunities that emerge from adversity.
These individuals will wish to start businesses and generate the jobs and taxes that will be needed to haul the country out of the mess it’s in.
And yet the regulator is saying that it will not allow these people - who are all likely to be self-cert candidates, whether prime or sub-prime - to access mortgage finance on this basis.
The FSA continually talks about working in conjunction with the mortgage market but I believe it makes such statements without conviction.
Why not let lenders get on with their business with a warning of tough penalties for combining credit and security risk?
The regulator’s present strategy to amputate rather than cure is just wrong.
MICHAEL WHITE
CHIEF EXECUTIVE
EMAIL MORTGAGES
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