The end of self-certification mortgages?
Author: Andy Bedford » Publish Date: 19 October 2009
I wrote an article some time ago about the FSA’s proposed changes to end self-certification and fast-track mortgages; I made a big point about how this could leave many people struggling to refinance and cause trouble for the recovery of the housing market.
The FSA confirmed last week that they would take action; the press has been making similar observations to my own today about the impact any regulation could have on our recovery and those borrowers with an existing loan of this type.
But over the weekend, I had a realisation; and made a U-turn on the subject. In reality, there are few legitimate borrowers who cannot “prove” their income.
The point is that the word “proof” and its interpretation is the key detail. Almost all people can show evidence that the income they declare is broadly accurate; they may not be able to prove income in the manner that a traditional full-status mortgage would require.
For example, if you have a business from which you could take far more income than you currently do without running it into decline, that is your prerogative.
You should still be able to evidence in a suitable way that your business has the potential for you to take further income and that the loan would then be affordable.
It may not be satisfactory at your local building society now, but lenders with good product development teams will soon see how to create a new type of product to cater for this market once their appetite comes back.
So if the FSA gets this legislation right and does not dictate or define what proof consists of, then there will still be the opportunity for lenders to market products for those with non-standard income, priced above full-status products as before but simply requiring some evidence to back up that the income declared is not a total fabrication.
The FSA just need to be careful not to try and make this legislation so watertight that it chokes the housing market to death.