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Boulger slams lenders’ ‘computer says no’ attitude

There is a ‘computer says no’ attitude among lenders with one admitting to refusing nine out of 10 borrowers on 90% LTV mortgages, says John Charcol.

Ray Boulger, senior technical director at John Charcol, says minor errors on consumers’ credit scores are stopping borrowers from getting mortgages.

He says: “Before the credit crunch, getting money from some mortgage lenders was nearly as easy as asking a resident of the North Pole to lend you some ice.”

Boulger says certain lenders fell over themselves to meet lending targets by offering loss leading rates, but we now find ourselves in completely the opposite place.

Boulger says: “Borrowers are being rejected at record rates, often for very minor indiscretions like being late with a credit card payment, and one major lender admits privately to rejecting 90% of the applications it receives for 90% LTV mortgages.

“The computer says no has become the most common utterance from some lenders. For borrowers it is difficult to know where to turn.”

He says those who rely on best buy tables frequently find that they don’t qualify and most high street lenders (Halifax is an exception) try to inhibit shopping around by leaving a hard footprint even when a customer just asks for a Decision in Principle rather than making a full mortgage application.

He says: “This blatantly contravenes FSA rules, with only a few footprints needed to crucify a credit score.”

But he does say that knowledge of the entire mortgage market is not only an enviable weapon, but absolutely critical to secure a competitive mortgage, and sometimes to secure any mortgage at all.

He says: “In this environment a good, independent mortgage broker is worth their weight in gold.

“The mortgage market has changed radically and is unlikely to ever return to what we knew before the summer of 2007, but it is not as dire as some think. Borrowers just need to know who to talk to for the right advice.”

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  • amir kharkowa 14th August 2010 at 3:37 pm

    RB I agree I also think that lenders need to scrap their AIP models if they then override the accept decision with ” we are declining it because it has failed affordability” So whakt is the point of online AIPs as this is happening every day with lenders

  • Michael White CEO Emailmortgages 13th August 2010 at 2:49 pm

    Lending is a balance of risk vs. reward. There is no such thing as risk free yet in a market where lending margins are at historical highs there is the real opportunity for lenders, or is there?

    Quite simply the appetite for loans is being very fully satiated with comparatively huge margins on simple product design. So simple indeed that the only rule is ‘Squeaky Clean’. Hence the lender who proudly boasts of declining 90% of high LTV apps!

    Ray is making a valid point of sorts although he has clearly touched a nerve with some on the issue of previous lending methodology. I am confident he did not mean to suggest we should return to the heady days of lending to anyone with a pulse!

    Instead, we do need the return of specialist lending on a much wider scale to assist those who are I believe being unfairly being declined. Lending decisions can still be tight but the margin that presently exists provides an opportunity to design products which are risk priced and properly underwritten by people such as the ‘grey haired underwriter’. Unfortunately, I cannot see this happening anytime soon.

  • Colin 13th August 2010 at 2:33 pm

    wouldn t surprise me to that the lender who declines 9/10 90% ers…..is Skipton.
    Just had a case declined for no reason other than failed credit score…..the most serious bit of his credit file they could give me was he is nearly at a limit on his credit card!!!!!!……

  • mic2002 13th August 2010 at 2:15 pm

    In reply to ‘old time underwriter’ above,I wold like to know where exactly did that get us? Ah yes..the FSA view that there is a dotted line from UK mortgage lending that caused the economic crisis? What nonsense.The millions of unaffordable mortgages maybe? Yeah right.Primary school economics rules again.Oh dear.For gods sake the recession was not linked in any way to UK mortgage lending – full stop.

  • AP 13th August 2010 at 2:12 pm

    America had a problem with Ninja loans, we didn’t. There were 46,000 homes repossessed in 2009, still lower than the 1995 figure which was right at the tail end of the 1989/92 downturn. We need to get a sense of perspective here wich is completely lacking. We have just endured the worst recession in 60 years and the moma of all credit crunches.

    There were some obvious areas to avoid a) self cert severe impaired 90% ltv remortgages b) Self cert 85%+ mortgages on BTLs on new build apartments with deposit gifts but for vast majority of people the market worked very well and the banks made money out of it. The losses our banks have made have been largely caused by dubious bond trading in CDOs and speculative developers and comercial property borrowers.

    Now the self employed are pretty much excluded from the market, and will be until they have three years excellent trading accounts (we have just had a recession remember) Those with lower deposits, a single missed credit card payment etc etc are all excluded. Meanwhile lenders have jacked up their margins on their captive clients.

    No sign of the FSA asking the lenders to treat customers fairly on that is there? The only good thing the FSA are doing is requiring individual registration of brokers, something they should have done at the outset.

  • The World According to.... 13th August 2010 at 1:55 pm

    looks like an advert for Charcol advisers… how many references to getting an adviser, was it 3???

    Goodness me, Charcol like I am sure a lot of advisers used the decision in principle route to gain commitment from clients… so the lenders have been doing it also….dear oh me!!!

    Lets see some worthwhile comments and news!!!

  • c. walker 13th August 2010 at 1:47 pm

    I urge you mortgage strategy to take a long hard look at where you go for comment in future. this industry has changed beyond all recognition in the last 2 years, there are new faces and new opinions out there that more accuratley reflect the state of play in a reset mortgage industry.

    a return to the ‘good old days’???!!! give it a rest.

    what next free school milk, jumpers for goalposts, outside toilets!?

  • Denis Gilgallon 13th August 2010 at 1:45 pm

    The point is quite a number of 90% 1st time buyers are absolutely creditworthy, low risk, and are the future customers for any Bank, just trying to get a foothold on property ladder. They are being treated shamefully simply because the Lenders no longer show any discretion or common sense.They should wake up to a missed market opportunity!

  • Carl Higgins 13th August 2010 at 1:40 pm

    Its obvious that previous lending was cavalier’ – however the latest reactions to the FSA etc will leave good self employed, and so many more at the mercy of rising rates with no hope of further finance. This will surely increase defaults and damage property values & recovery – someone has to take risk!

  • anon 13th August 2010 at 1:39 pm

    should read “tired old broker slams new responsible lending attitude”!!!!

  • old timer underwriter 13th August 2010 at 1:36 pm

    where has RB been for the last 2 years years!? whilst he appears to feel the ‘computer says no’ all too often, it was previously the (human) underwriter, with targets to hit, and BDM’s, with bonuses to earn, that would ignore missed payments etc in the rush to hit that months target….

    and look where that got us.

    Very easy for Mr Boulger to lend other peoples money, take the proc fee (although not that much in his firms case we have recently learned)and move on….

  • Colin Chapman 13th August 2010 at 1:35 pm

    the 9/10 decline rate doesn t come as any surprise to be honest…lenders don t want that type of business and are only paying lip service to it by hiking the rates…….although I imagine its very profitable right now!!!!!!!!!!………lenders direct operations are pretty poor……its a non advised service, constrained by the 9-5 opening times or spending an hour + on the phone………a broker is easy, convenient and in our case without charge. The market will return and at £200bn annual lending and some 66% down turn in broker numbers since the heights and goo living can once again be made

  • Sarah Smith 13th August 2010 at 12:58 pm

    Before the credit crunch, getting money from some mortgage lenders was nearly as easy as asking a resident of the North Pole to lend you some ice.”

    Isn’t that precisely why we are in the mess we are???

  • unemployed underwriter 13th August 2010 at 12:45 pm

    This has always been the case with large lenders and we need more of the small & specialised lenders in the market place who use real people with experience of underwriting who look at the whole case and get a feel for the lending and the security and use the computer as an aid to making a decission

  • Grey Haired Underwriter 13th August 2010 at 12:30 pm

    Not just a good independent broker but a lender who has decision makers that are not just plugged in. And this market isn’t new but a return to the ’70s – perhaps not quite as radical as is thought and I would have expected Ray to remember that far back.