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Kensington asks brokers to check borrowers’ repayment vehicles

Kensington has written to a number of brokers asking them to provide evidence that certain clients’ repayment vehicles are on track to pay off their interest-only mortgage.

The lender says it has picked a handful of brokers at random and has decided to carry out the exercise to help with its future decision making.

Tom Cleary, financial services director at Start Mortgages, is one of the brokers who has received a letter.

His client has an interest-only mortgage with an ISA/savings plan as the repayment vehicle.

The letter says as part of Kensington’s responsible lending obligations it is reviewing interest-only cases to ensure the repayment vehicle is operating as intended.

It then asks the broker to provide documentary evidence in 14 days that the customer’s saving plan is on target and confirmation of the payments made into the plan.

Cleary says the move by  Kensington is likely to be a result of proposals in the Financial Services Authority’s Mortgage Market Review, which specify that lenders must check on the repayment vehicle of the mortgage at least once during its term.

But he says the responsibility for that lies firmly with the lender, not the introducing broker.

He says: “As a firm, we are not even authorised for savings and/or investments, so I would not imagine the regulator would be satisfied with the validity of any guarantees we would make on behalf of the client.

“So long as the lender has robust checks in place at point-of-sale, and the intermediary has satisfied these prior to the mortgage being offered, the responsibility to check the repayment vehicle from there on must remain with the lender.”

Nevertheless, he says it is only right that Kensington wrote to brokers as it is them who introduce the clients.

A spokesman for Kensington says: “We have no immediate plans to change our policy around interest-only and are carrying out the exercise to help with our decision-making process and to educate us.

“Our relationship is with brokers which is why we have written to them.”

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  • Sub Prime Kaboooooom 2nd March 2012 at 4:13 pm

    Sorry guys I have tried to respond a few times but this website doens’t like my browser for some reason.

    Humble apologies Shaks – I really did have the wrong eng of the stick.

    I’m actually still in shock that there is basically no one qualified or responsbile for advising a customer about the repayment vehicle! Madness.

  • Sub Prime Kaboooooom 2nd March 2012 at 1:15 pm

    Shaks………I have to offer my humble apologies – I wasn’t quite getting where your coming from and hands up I didn’t realise you were not expected to comment on the repayment vehicles customers use.

    Does this not highlight a rather terrifying gap in the whole thing though?

    A lender isn’t qualified to comment on the performance of a repayment vehicle and neither is a mortgage broken then who the hell is!

    Basically we’re saying that a customer is effectivly receiving no qualified advice throughout the entire process about what is probably the most complex part of the whole deal?

    Jesus – its no wonder we’re in the state we’re in.

  • Mike Snorkins 2nd March 2012 at 11:48 am

    Collaborator Alert! So, the clients wanted interest only mortgages and the lenders were happy to lend without taking any proof – especially when they were all greedy for market share. All of a sudden, the lenders have become ‘Holy’ and surprisingly enough, are passing the buck to the broker. No change there then, sounds like a ‘fast-track’ move to me. All that talk of robust credit scoring being the Underwriting Way Forward. Maybe because it allows for computerisation of the underwriting process and getting rid of expensive staff? All you collaborators out there are NOT writing/lending IO BTL business then? Tell me that’s true! Oh yer, I forgot about tax efficiency, that’s good justification!

  • bobby 2nd March 2012 at 9:30 am

    Sub Prime – No sharks is RIGHT. The mortgage broker sources the best and most appropriate deal for the client. Of course they will check repayment vehicles are in place and advise the client the implications of interest only and that there must be a repayment plan but that is where it ends. Most advisors are not regulated to give investment advice so cannot do what you they say they should. anyway. Also are you seriously suggesting it is the brokers role to call the client up every couple of months to see if they are stll paying into their ISA ?! The broker will most likely review the situation at their annual review meeting with the client but brokers are introducers of business to lenders, they do not actually lend the money and it is ultimately the CLIENTS responsibility, I know that is a radical view in this day and age ! and also the lender to check plans are in place annually. So STOP the crusade and misplaced, factually incorrect comments against brokers.

  • Fran Brogan 1st March 2012 at 8:07 pm

    Until MMR brokers are responsible for the advice given ( and all sold since 2004)to the customer on Interest Only cases – Hope their PI cover is in place as many claims coming your way based on these responses – very sad for their customers the attitudes shown towards them…..

  • craig 1st March 2012 at 7:10 pm

    some comments are startling. If a broker tells a lender there is a vehicle in place and the lender decides to check that fact then where is the problem? it is clearly part of the brokers role to confirm the integrity of the sale and they have presumably already received a commission in good faith that this job has been done. Howver, i would definitly agree that where an IO mortgage was sold and there was no requirement for a vehicle that the broker should not have to carry out any work in this respect. The fact that you are not authorised to sell investments or provide investment advice is irrelevant

  • Martin 1st March 2012 at 5:48 pm

    I beleive that most replies would be something like this!
    My clients had informed me that they intended to take out an ISA as a Repayment Vehicle but on contacting them recently I have discovered that they did not. Baboom!

  • Dave 1st March 2012 at 5:32 pm

    It is unfortunate that Subprimekabooooom does not understand the point that Shaks is making and therefore does not understand the difference between an Independent Financial Adviser and a Mortgage Broker. For clarity Subprimekabooooom a Mortgage Broker is not allowed by the FSA to arrange an Investment Plan on behalf of a client to repay the mortgage.
    OK? Are we clear now ? Going back to the subject being debated if I had arranged a clients Investment Plan or Repayment Vehicle (and by this I dont mean a car loan), then I would have no objection to reviewing the plan to ensure that it was on track ( I dont mean tracker) and confirm this to the lender as requested.

  • Roger Travis 1st March 2012 at 3:59 pm

    I couldn’t see in the article how much of a proc fee they are paying for this extra work?

  • Sub Prime Kabooooom 1st March 2012 at 3:50 pm

    Shaks is that dripping in sarcasm or are you literally out of your mind?

    “Mortgage Brokers are intermediaries/facilitators/introducers of business to lenders”

    Mortgage brokers are ADVISORS to their clients and as such have the sole responsibility of ensuring their repayment vehicles are adequate……lest we forget us mere lenders are not qualified to give this advice or make any assumptions.

    The best a lender should do is a sense check to make sure it roughtly makes sense.

    If your statement is a flavour of the mentality in the broking world then god help us!

  • Mike Snorkins 1st March 2012 at 3:25 pm

    I’m sure K’ton were quite happy to accept these mortgages in the 1st place – no doubt when market share was their no. 1 priority. If they were that concerned originally, they would have implemented this process at the time they accepted the mortgage app. That’s what I call Underwriting. All of a sudden, they’re all trying to proove how ‘good’ they are (in the FSA’s eyes anyway). No doubt there will be a clamour of support from the ‘collaborators’ saying this is a good idea. What about financially astute borrowers who now can’t adopt an interest only with overpayment route? I can’t offer them ‘best’ advice now. So much for a free market – you are free to do as we tell you. What about the banks borrowing at 1% and then charging 20% APR for loans? No wonder HSBC are coining it in.

  • Roger Travis 1st March 2012 at 2:54 pm

    I didn’t see how much of a proc fee they were going to pay for Brokers reviewing this on their behalf?

  • Shaks 1st March 2012 at 2:51 pm

    Mortgage Brokers are intermediaries/facilitators/introducers of business to lenders. The lenders need to stop passing the buck and and sataisfy themselves that the repaym,ent vehicles are on track. This is totally ridiculous. Most mortgage brokers are not authorised to advise, comment upon or transact Investment business. Any such letters I receive would go in the bin (recycling bin. We are not responsibel or liable in any way if the repayment vehicle is not maintained or under performs. Kensington can go stuff their review up their rear end. I haven’t given them any business in 5 years and certainly have no intention to do so now!!!

  • Shane Hutchins 1st March 2012 at 2:19 pm

    “Our relationship is with brokers which is why we have written to them.”

    Really. Have you ever tried calling a lender a day after you complete a mortgage for a client with them. “Sorry, the client will have to call in, we can not discuss that with you under data protection”.

    Of course its the client and the lenders responsibility to check this. Or have KMC got rid of so many staff that they now need help with their admin.