Suggestions that Selfcert.co.uk will have to cease lending once the Mortgage Credit Directive comes into force are baseless, according to founder Graeme Wingate.
Here, Wingate answers Mortgage Strategy’s questions about the future of the lender, rebuffs FCA inferences about the firm and answers his critics.
There have been suggestions that you will no longer be able to offer self-cert loans after the Mortgage Credit Direct comes into effect next month. Is this true?
No. There’s nothing in those rules. The wording they use is ‘creditors should make reasonable enquiries and take reasonable steps to verify consumers’ underlying income’. It’s very, very vague – there’s nothing in it. We’ve had legal counsel and legal experts on it and they’ve said there’s nothing there. It’s unenforceable. What is ‘reasonable’? If someone is paying £1000 in rent each month, is it reasonable to assume that they can afford £500 mortgage repayments? Yes, it’s very reasonable, so we’re very confident on that.
We think the FCA are wrong on a few things. They made a couple of statements that we don’t fully agree with. They seem to indicate that we are not subject to UK laws, which is not true. All contracts that we sign are under UK law but not UK regulation, there’s quite a difference. If we ever want to enforce a contract it’s got to be under a UK judge using UK laws. The FCA didn’t really indicate that.
They also said we couldn’t use UK call centres, which we strongly disagree with. We do have a UK call centre and under those rules people can speak to a UK representative. The Czech company can outsource customer services to a UK company. So long as that UK company does not give mortgage advice it can still handle repayments, things like that.
What would you say to people who are negative about this type of lending?
We’d say that they’ve not seen the figures or the emails we are seeing, about the low risk. We are getting people turning up with LTVs of 50 per cent that still can’t get a mortgage from places. Yet people that are working in so-called secure jobs get a 95 to 100 per cent mortgage these days.
These people are always only one or two days away from being made redundant or getting the sack, but through no fault of their own. So our customers have got 50 per cent LTV and we can’t lend to them under the UK rules? It just seems very odd.
You say you’ve seen lots of interest in self-cert, did this surprise you?
That’s right. We only ever had enough for 250-300 mortgages, so it was never going to be an industry changer. We only had about £30m-£50m. So we were surprised with the demand. I think we had about 4,000 in the first day or two and now we’ve had about 9,000. So to say we could only do 250-300 mortgages, there was a lot of disappointment out there.
Could you ever see yourself expanding to meet this demand?
It’s probably not for us. We’ve had some people coming in wanting to invest some money in it, but we’re just a group of friends that have known each other for years, so we wanted to keep it within us. We would be happy to pass details on to other people if they want to set up abroad, and give advice, but it’s not for us to turn it into some kind of megabrand. We are trying to keep our heads down a little bit.
Does this suggest there is a demand for this type of lending?
Yes. It’s very low risk, for us. We’ve been in lending for years. We assess risk all the time. We’ve got no idea why people think this is risky, it’s bizarre. Before, with self-cert, I think the problem was a lot of people in the chain benefitted. Brokers, surveyors, valuers, they all got money when the loan was taken out. No-one was really looking at who benefitted when the actual money was paid back. The overvaluation of properties back then was quite big. We’ve never seen details about the number of defaults on self-cert. That’s never been released. The FSA at the time said ‘we don’t keep the breakdown of what kind of mortgages defaulted’.
Where would you like to see the lender be in a year’s time?
We are probably going to be in the same position as what we are now. We were in the payday loan industry, around seven or eight of us. Then the FCA brought in the price caps. So we’ve reduced how much we’re lending through the websites for the unsecured market. We were basically a bit worried where to put our money. We didn’t want to put it in the stock market. We didn’t really want to get into buying properties, so this just seemed the safest place to put our money.
That was the main reason behind SelfCert.co.uk, rather than just trying to grow a mortgage business. We didn’t really want to take on the mainstream lenders, so we had to ask ourselves why people were going to come to us? That kind of led us down the road of self-certs. Those customers tend to have bigger deposits and lower LTVs.