Brokers abusing B2L for self-cert clients, says FSA
Share
The Financial Services Authority says brokers are using buy-to-let and let-to-buy mortgages for self-cert customers who would not qualify for a residential mortgage.
In its latest Mortgage Lenders’ Round-up newsletter, David Geale, manager of retail intermediaries and the mortgage sector at the FSA, says lenders offering buy-to-let and let-to-buy products need to ensure that their systems and controls cannot be gamed by intermediaries.
He says: “We are aware that some buy-to-let and let-to-buy mortgage products are being used by intermediaries to circumvent the more stringent income and affordability checks now undertaken on residential regulated mortgages.
“This is particularly the case where lenders are offering buy-to-let products to first-time buyers and where the affordability test is based on projected rental income only.
“We believe lenders with weak systems and controls are more likely to be exploited by intermediaries still looking for self-cert mortgages.”
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
View results 10 per page | 20 per page
Readers' comments (18)
Anonymous | 23 Jun 2011 9:02 am
Surely if the FSA are stating this as a fact then they know who the brokers doing this are. If this is the case then shut them down. I am sick to death of being tarred with the same brush as these idiots that are only interested in short term commission and not the financial wellbeing of their clients.
Unsuitable or offensive? Report this comment
Anonymous | 23 Jun 2011 9:11 am
Funny how there isn't a plethora of comments from brokers on this story. As much as I sympathise with some of the brokers' whinging, let's face it, most of them spent so much time scooping out of the trough for being glorified administrators, it's hardly surprising they're being hit so hard now. Far too many brokers see 'getting a case through' as a game, instead of a serious transaction.
Unsuitable or offensive? Report this comment
Anonymous | 23 Jun 2011 9:12 am
So what's new?
Wouldn't it be good if lenders and brokers were on the same side.
Seems there's little hope of that ever happening.
Unsuitable or offensive? Report this comment
Anonymous | 23 Jun 2011 9:23 am
Mr Geale- why dont you get one of your staff to spend time at some local high street banks and building socieities branches and see how the "under pressure to hit target" advisers are abusing the fast track system to get residential customers mortgages-who ordinarily cannot prove income. That will keep you all busy for a few years! Walk on!
Unsuitable or offensive? Report this comment
Anonymous | 23 Jun 2011 9:26 am
How long has it taken the FSA to work this out? I doubt Lenders were even worried, until they were spotted by the Press or FSA.
Meeting their lending targets and presumably charging a higher rate of interest is all that concerns them. Who said the totally sales focussed culture was dead?
Unsuitable or offensive? Report this comment
Anonymous | 23 Jun 2011 9:36 am
for most first time buyers, rasing a deposit is the biggest issue. Why would brokers be using buy to let products when the maximum loan to value available is 85% and rates high at that level. Plus most buy to let lenders now require proof of income and most won't lender to first time buyers - especially the main lender offering self cert buy to let!!
Unsuitable or offensive? Report this comment
Toddy | 23 Jun 2011 9:38 am
Looks to me that the FSA is not keeping up with the lenders' criteria, or they are living in the past: There are very few lenders who will allow a BTL mortgage to FTB's. Where they will allow it, the lender is basing the lending decision on their proven income. The only exception to this, I believe, is Northern Rock, where your only restriction is that you have to earn above £25k. And this is a government owned bank!!
Unsuitable or offensive? Report this comment
Daniel Taylor | 23 Jun 2011 9:38 am
Whilst that may be used by some unscrupulous brokers, it is not something most would consider and lenders are not generally that naive. The effect of such comments and shallow diagnosis from the FSA is to make lenders' criteria even more restrictive which leads to even more good borrowers failing ever tighter tests. Lending is a risk business. I can eliminate risk overnight by stopping all lending. The FSA seem to be doing the same but at a slower pace.
Unsuitable or offensive? Report this comment
David Jones | 23 Jun 2011 9:50 am
Was that not obvious to any decent industry expert when 'Self Cert' was killed off. 'Self Cert' existed for many years with lenders extremely happy with their margins and the arrears book. There are thousands of self employed people who want to buy but currently struggle to buy because lenders discriminate against them. Why is it that an employed person can secure a mortgage based on income they are going to be on in 3 months time, when a self employed person has to be earning increased income for upto 3 years before a lender will work off the higher figure? We need lenders to have some balls and show creativity and find a solution for our self employed clients.
Unsuitable or offensive? Report this comment
john | 23 Jun 2011 9:53 am
this is how i bought my first house. I was single, with a 15% deposit living in london, no dependents, no commitments ... had affordability but not the multiples. Had no other choice but to present it as a buy to let and move in, the deal was a no brainer. In todays market with the self cert market completely disapeared I can understand why its on the increase
Unsuitable or offensive? Report this comment