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Computer says NO

The weekend’s FT Money section had an article headed ‘Borrowers refused best rates’, focusing on good quality clients being turned down for stupid reasons, a problem which is escalating.

Brief details of a couple of examples I gave the journalist are quoted but to fully appreciate the issues I think it would be helpful to provide more details.

One client’s buy-to-let application was rejected solely because he had recently opened several savings accounts for £35,000.

His father had £2m on deposit with RBS and became concerned about this prior to the government bale out.

As a result he withdrew most of the money and he and his son each invested £35,000 (the compensation limit at the time) in a large number of banks and building societies.

This client had recently bought a residential property and we arranged his mortgage with Halifax, at which time he got an A credit score.

However, when shortly afterwards we applied to BM Solutions for a buy-to-let mortgage for him the application was rejected. Why? Solely because opening all these savings accounts triggered multiple credit searches.

BM Solutions is very computer driven and if the computer says no that’s it.

We subsequently obtained the mortgage from Bank of Scotland, which allows human underwriters to make the final decision and hence they listened to our explanation for all the credit checks. It is interesting to note that all 3 lenders are part of the HBOS Group.

The other example I gave the journalist was of a client who wanted to borrow £560,000 on a £1.1m property on 2 times income from Northern Rock.

The case was declined but Northern Rock was happy to offer £500,000, despite the client easily qualifying for £560,000 based on their criteria. So what was the problem? Perhaps the mortgage valuation came in well under £1.1m, thus increasing the LTV above the 65% maximum on the deal.

No, that was not the problem; the valuation came in at £1.1m.

After obtaining a copy of his credit report we were able to establish that the problem was caused by a single mobile phone bill payment for a trivial amount being late and seven credit searches having recently been done, two of which were by Northern Rock.

Despite escalating this to a very senior level at Northern Rock we could not get the decision overturned. The computer had won again. A key factor in this client choosing a Northern Rock mortgage was that he wanted a fixed rate with the total flexibility they offer and as he was able to make do with £500,000 he took the lower amount. This is yet another example of hypocrisy from Gordon Brown, who says he wants lenders to lend but when it comes to it his own nationalised bank makes a stupid lending decision.

Before nationalisation Northern Rock allowed human underwriters to override the computer when appropriate.

These are just two examples but more and more perfectly good quality cases are being turned down by lenders because borrowers don’t tick all the boxes.

Increasingly cases are being declined because the computer says no, whereas before the credit crunch we could have had an intelligent conversation with the lender to resolve any issues instead of the computer having the last word.

In the current market it is easy for lenders to turn business down because there are plenty more applicants queuing up behind.


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