No typical customers

There has been much discussion on the timing of the return of the sub-prime mortgage market.

Indeed as part of the FSA’s Mortgage Market Review, there is the question as to what extent it should return and what controls there should be over products offered to those who have displayed payment difficulty.

Customers who hold sub-prime characteristics remain more prevalent than they ever did.   The availability of funds for this market however still remains limited from a lender perspective. 

Both capital rules and genuine concerns over affordability continue to make life difficult for people we looked after very well BNR (before Northern Rock).

One of the key issues that prevailed BNR was that there were a plethora of terms to cover individuals, but no consistency or clear definitions. 

The Mortgage Market Review has considered that it may be good to have clearer definitions of commonly used terms.

A “new” term on the landscape recently is “complex prime”.  When I first heard this I thought I knew what it meant. 

Being of a certain age, this sounded like it was a prime customer, one with no adverse credit issues – no judgements, IVA or bankruptcy and good payment history. 

The “complex” element would have come form the nature of the transaction.  House type, mortgage term, income complexity, issues with ownership or co-owners.

These are not, in my view, prime, complex or otherwise.  They are near prime or soft prime or another term such as light adverse, to be properly determined and defined.

But apparently not, “complex prime” I am told appears to be customers who have incurred “non-toxic debt stress” characteristics. So this is not bankruptcy, an IVA or debt judgements, I assume. 

This is because in any world I understand these are sub-prime characteristics. 

Unless of course these are from a very long time ago, having been satisfied.  Where we may have “issues” are where judgements have been quickly satisfied or where missed mortgage or credit card payments are the reason for the rejection. 

These are different in nature, not paid at all or missed by a day or two. An agreed minimum payment missed or missing the full payment.  Which is a bigger issue?

Different lenders will have their own approaches to these issues.  And rightly so as they will have different experience, risk assessment processes and ability to fund and price for these riskier applicants. 

These are not, in my view, prime, complex or otherwise.  They are near prime or soft prime or another term such as light adverse, to be properly determined and defined.

For me we would benefit from some common terms and we should look to our lenders who want to lend in this market to help us with this.