Rely on your underwriters, network urges lenders
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Legal & General Network is calling on lenders to restrict their use of credit scores and rely more on underwriters.
It believes that the self-employed and complex prime mortgage markets are inadequately served and that more lenders should be flexible when it comes to risk assessment.
Martyn Smith, head of mort-gage products at Legal & General, says underwriting and risk assess-ment can take many forms but there has been an over-reliance on credit scoring by big lenders.
The lender recently unveiled a mortgage requiring no credit scoring in association with Hanley Economic Building Society.
Smith says: “Experienced under-writers can conduct more accurate assessments of affordability than any automated process.
“There’s scope for a back-to-basics approach which could mean that more mortgages for self-employed and complex prime borrowers became available.”
He says a borrower’s record on servicing debt is crucial to assessing their ability to repay but minor blips do not necessarily mean their creditworthiness should be downgraded.
Smith adds: “The difference between credit scoring and under-writing is a bit like the difference between an off-the-peg suit and a bespoke one.”
A number of lenders including Kensington and Aldermore have recently launched products that do not rely as much on credit scoring and instead are considered by underwriters.
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