Paragon implements PRA underwriting changes months ahead of deadline

Paragon has revealed that it will implement phase two of changes to its underwriting standards months ahead of the PRA deadline of September 30.

The regulator will impose stricter underwriting standards on buy-to-let lenders for portfolio landlords with four or more mortgaged properties under new rules.

John Heron

Paragon plans to introduce its changes for all new applications from Monday 17 July, saying its decision reflects the fact that the new standards ‘require only minimal change to its existing approach, as well as a desire to give intermediaries as much time as possible to make any necessary adjustments ahead of the mandatory deadline.’

From Monday, brokers should route all Paragon applications from portfolio landlords with four or more mortgaged properties exclusively through Paragon Mortgages.

As is currently the case, any application from a limited company landlord or from a landlord seeking finance for a house in multiple occupation or a multi-block unit should also be submitted to Paragon Mortgages.

Mortgage Trust will focus on applications from individual landlords with three or fewer, single, self-contained, mortgaged properties.

Paragon Mortgages requires that all applications are accompanied by a comprehensive property schedule and seek additional documentation as required to fully understand each landlord’s business, including an asset and liability statement, cashflow details and a forward-looking business plan.

Paragon Mortgages managing director John Heron (pictured) says: “Currently, many lenders focus mainly on the rental income and value of the property they are lending against when underwriting buy-to-let property.

“At Paragon, we’ve always asked for information on all the properties a landlord holds and on the full range of their economic activity so that we can assess their business in the round and consider the impact of the new lending on their performance.

“Against this background, this implementation of the PRA phase two changes should result in minimal change for intermediaries and their customers.”