L&G calls for more flexible lenders
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Legal & General Network believes that the self-employed and complex prime mortgage markets are under-served and that more lenders need be flexible when it comes to risk assessment.
It says this means reduced use of credit-scoring and more involvement of underwriters.
Martyn Smith, head of mortgage products at L&G, says underwriting and risk assessment can take many forms but there has perhaps been an over-reliance and tightening on credit-scoring by large lenders.
He says: “Our recent launch of a mortgage with no credit-score with the Hanley Economic Building Society showed that there is another way. We are also seeing a more flexible and refreshing approach from some of the new lenders coming to the market.”
He adds: “Expert underwriters can conduct more accurate assessments of affordability than any automated process ever can. There is scope for a back-to-basics approach which would facilitate a greater likelihood of more mortgages for self-employed and complex prime borrowers to become available.”
L&G believes a borrower’s track record on servicing debt is crucial to assessing future ability to repay, however minor ‘blips’ do not necessarily mean that a borrower should be downgraded in terms of credit-worthyness.
It says underwriters can look at the bigger picture and put these blips into context to ascertain their true impact. However, using expert underwriters is costly and not for mainstream, high-volume mortgage lending.
Smith adds: “The difference between credit scoring and underwriters is a bit like comparing an off-the-peg versus a bespoke suit.”
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