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Brokers abusing B2L for self-cert clients, says FSA

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.”



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  • mic2002 24th June 2011 at 5:35 pm

    Dear Anonymous post 10.25 am – since when did anyone mention that there was any fraudulent information? And where did you get the bit about not able to pay? All we have been told is that (apparently) some BTL are used for residential.That does not make a fraudulent case or reflect on the ability to pay.

    How many customers out have a residential mortgage and say 3 yrs later rent out the property using the same mortgage.Thats all fraud too isnt it? Get real.

    How many people applied for a platinum credit card when their income was just below the the limit rather than the gold one?

    Don’t make the mistake of believing eveything the FSA says is correct or balanced.

    As a footnote,where was this same astueness when the credit crunch was rolling down the track at us in 2007,and NOBODY at the FSA saw it? Yet they can spot the minutiae in the mortgage market at the drop of a hat? Please.

  • Doris 24th June 2011 at 10:25 am

    Fraud is fraud, I have no sympathy for a customer who signs an application containing fraudulent information then can’t afford to pay.

  • Supermono 23rd June 2011 at 9:57 pm

    What we really have here is a case of ‘when worlds collide’.

    One world is the legalistic, heavily procedurally driven regulator – the FSA, a classic bureaucracy.

    The other world is that of the mortgage intermedaries, at the sharp end of the business spectrum, and currently, given the low levels of mortgage transactions, struggling to survive.

    Thse two worlds are fundamentally incompatible and will always be very uneasy bedfellows.

  • Greg Dock 23rd June 2011 at 1:51 pm

    First time buy to let products tend to be low loan to value so lenders have restricted access and have imposed non-self cert minimum income requirements. High arrangement fees and also common on these products. Gone are the days of 15% self cert deposit products. When was this FSA insight dated for; 3 years ago?

  • DerKrobsen 23rd June 2011 at 1:28 pm

    I (a broker) mentioned this scenario to a couple of lenders at a conference recently and no-one seemed too bothered.

  • Bobby 23rd June 2011 at 10:53 am

    The FSA have had an agenga for many years to set out and wipe out the broker community. This is not even hidden or disguised in any way. They are close to achieving their goal with fines, slurs, licence withdrawals on top of 80% of the brokers who have thrown the towel in already. I would respect the FSA more is they just made a statement ” we do not want any brokers/ ifa’s in the market and want clients to go to their banks in future for mortgage and financial advise as its much easier for us to ” regulate ” half a dozen large banks.

  • Andrew Carter 23rd June 2011 at 10:43 am

    What’s the big deal? If the property stacks up on a buy to let why shouldn’t it be underwritten on that basis? If the clients decide to move in and cant afford it they can always move out and let it.

    In many cases I suspect that first time buyers are actually using buy to let mortgages to hedge against further house price inflation, so that when they do have the affordability to buy a property, they have already guarded against their deposit being erroded against higher prices.

  • Les Whitfield 23rd June 2011 at 10:11 am

    Is this the silly season?

    We are suffering from a spate of intermediary-bashing at the moment, with intermediary fraud being in the spotlight.

    Where does the FSA get all this information it is using to darken our image?

    It is undeniable that SOME intermediaries are involved or complicit in fraud. The same goes for SOME solicitors, accountants, surveyors, staff of lenders and others.

    Regarding B2L, some lenders are quite happy to lend to first-time buyers and, for some people, this is a sensible investment opportunity. Over the years, I have helped several first-time buyers acquire B2L properties. Several of these continue to live in their parents’ homes or have since bought their own homes. To the best of my knowledge, only one has taken up residence in the B2L and this was after informing the lender and switching to a residential mortgage.

    The FSA should justify its position or withdraw the slur.

  • john 23rd June 2011 at 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

  • David Jones 23rd June 2011 at 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.

  • Daniel Taylor 23rd June 2011 at 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.

  • Toddy 23rd June 2011 at 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!!

  • naish 23rd June 2011 at 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!!

  • Keith Jagger 23rd June 2011 at 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?

  • AJK-Kop 23rd June 2011 at 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!

  • Paul Violet 23rd June 2011 at 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.

  • Daniel 23rd June 2011 at 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.

  • Phil Shelford 23rd June 2011 at 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.

  • john 23rd June 2011 at 9:00 am

    Cheers Dave, as opposed to blaming us, again, why don’t you look at the lenders – in the past week i have 2 clients who had almost the exact same story. They went into Halifax branches, and expressly told them they were not going to live in the properties, they were going to rent them out. Did they refer them to an IFA or BM, no they did them on a standard residential basis. When the client wanted to buy another, a new branch adviser said she couldnt as she already had mortgages on a 2nd home basis and accused her of lying to the previous branch adviser.

    Suggest you look at the diret channel first, after Panorama last week it is obvious the mis-selling is institional with the direct providers.