Lloyds to carry out interest-only checks

6 October 2010 | By Natalie Thomas

Lloyds Banking Group is to randomly select interest-only cases and ask brokers to provide paperwork which evidences the repayment vehicle stated on the mortgage application.

This sampling will be on cases submitted after October 15 2010 and will be carried out after the offer stage.

The bank says as a responsible lender, it is important for it to undertake random sampling, which is a process already in place for other areas within the Group.

In order to satisfy a sampling request, brokers will need to provide the following:

For endowments - a copy of the latest projection statement dated within the last 12 months
For stocks and shares ISA - a copy of the latest investment statement dated within the last 12 months
For unit trusts/open ended Investment companies - a copy of the latest investment statement dated within the last 12 months
For pensions - a copy of the latest projection statement dated within the last 12 months
For investment bonds - a copy of the latest investment statement dated within the last 12 months
UK Stocks & Shares - a copy of the share valuation on date of assessment
For savings - a copy of passbook/statement of balance within the last 12 months
For sale of a second home - property details, amount of any mortgage debt and mortgage provider.

If brokers are unable to satisfy a sampling request, Lloyds says it will contact the client directly to request the appropriate documentation.

If it does not receive the appropriate documentation when requested, it may have to review the original application.

A spokeswoman for Lloyds, says: “In May, the Group announced that it has conducted a strategic review of interest-only lending.

“We are now looking to implement the change that we communicated in May – introducing random sampling, enabling us to ensure the existence of an appropriate repayment vehicle.”

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Readers' comments (20)

Anonymous | 6 Oct 2010 3:18 pm
As a responsible lender they will check for this info POST offer!!

Surely as a responsible lender they should look for this info as part of the underwriting process PRE offer rather than delaying and possibly letting clients commit to buying properties.

I know in theory all brokers will ask for this from the clients before submitting an application to Lloyds banking group lenders but there will be a small number of brokers who will take the risk or not think about it.
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Mike The Mortgage Man | 6 Oct 2010 3:19 pm
Difficult to disagree with Lloyds trying to eliminate interest only deals, but by having such a restrictive panel of valid repayment vehicles I can't help but believe that another baby has been thrown out with the bath water.
Frankly having a good experienced BDM with sign off authority would have been more beneficial for the bank and the consumer.
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Anonymous | 6 Oct 2010 3:25 pm
& what of cases where the client tells you that they are going to take out an ISA or increase their pension contributions once it has gone through?
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Anonymous | 6 Oct 2010 3:49 pm
Do you actually believe them then?
If not, why should LBG?
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Anonymous | 6 Oct 2010 3:59 pm
What if there will be inheritance to pay off the mortgage. Will Lloyds ask to see the will. You could say that inheritance is not guaranteed, but neither are endowments, stocks & shares, pensions or any of the other investments named by Lloyds as we know from experience.
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Danny Lovey | 6 Oct 2010 4:01 pm
What! So Lloyds are now making the Mortgage Adviser responsible for the borrower paying their endowments instalments or ISA's or anything else you can think of ? That is therefore a bit of buck passing by them for not ensuring that the borrower does what they said they were doing!
As I recall, Halifax always sent out their yearly statement and with anyone with interest only stating that it was the borrowers responsibility to ensure that they have a means of repaying their interest only mortgage.
Shame on you Lloyds, it seems you are falling into the FSAs trap and anticipating it will go through as per the discussion paper. The CML has said how prohibitive the costs of checking this through the life time of the mortgage is so you are trying to do it on the cheap by using the mortgage broker X number of years later to do your work for you.
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Anonymous | 6 Oct 2010 4:11 pm
Responsible lender, TCF - NOT! Top of the list recently with the largest number of complaints against them. This is just another appalling tactic to lay blame on the diminishing intermediary community and then chop a few more agencies..
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Anonymous | 6 Oct 2010 4:27 pm
I dont disagree with the seniment but it took lloyds 15 months to produce a pension statement for my wife who worked for them after 5 requests, was told as she was in her early fifties is wasn't a priority! made redundant 4 months later.
my LBG shares would have paid off my mortgage at £4.50 a share, no chance at current share value. practice what you preach please
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Kevin friend | 6 Oct 2010 4:34 pm
Firstly, Mr ANON. LBG are most likely to have the most complainst as the group represents the largest number of customers. It is a reasonable approach but demonstrates that there is a clear need for direction on this repayment method. I do agree that certainty pre-offer is important, however, there are many lenders looking for reasons not to lend as funding is the biggest issue. we all need an MMR Jab which works not a one size fits all solution.
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AP | 6 Oct 2010 4:48 pm
In the interests of TCF all checks and verifications should be made PRE-OFFER. That is before a customer commits to a purchase and 10% of the value of their purchase. Doing it afterwards is not in a customers interest in anyway, especially where the threat is to withdraw the offer.

And where are the FSA when it comes to TCF? on the side of the banks. Some regulator.
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