It was no surprise that this stance has been maintained. Yes, we can argue the differences between self-cert and fast track and yes, we also know that not all self-cert mortgages are ‘liar’s loans’. Even the FSA now accepts that fast tracked cases perform better than even prime cases. Despite this the FSA are wedded to this change.


The death of self-cert throws up


problems for existing credit worthy borrowers unable to prove their income - 45% of applicants at the height of the market according to the FSA. But leaving that argument aside, is providing proof of income really that big a deal? Some argue that self-cert grew because lenders were inflexible with the evidence they would accept from a borrower, a particular issue for self employed customers where three years accounts will not necessarily show their current income position. Indeed the FSA has left the type of evidence in the remit of lenders, so this should mean more complex financial situations would not be hindered by the new rules. Or perhaps we should wait for the guidance! The FSA also focuses on affordability, making the lender ultimately responsible. It proposes that the basic elements (income, expenditure and a stress test) should always be included in the assessment. For many lenders this will not mark a major shift. Many lenders conduct affordability checks, although some simply use income multiples or a hybrid of the two. These lenders can demonstrate that their lending is responsible through high satisfaction rates and low levels of default.


so whAt About bRokeRs? With lenders ultimately responsible for affordability and income verification, does this mean the end of the mortgage broker as we know it? An Oxera survey of lenders commissioned by the FSA found that lenders would on average reduce the number of intermediaries they work with by 29% as a result. However, contrary to some of the doom and gloom in the recent trade press I suspect, and hope, not. The fact is the mortgage market is not going to go back to the days of 2006/7 any time soon. The restricted market we have now is the new norm in the short


term and every firm, whether it be broker, lender, valuer or solicitor will be affected by it. It is no good simply arguing it is not fair or, it wasn’t our fault, (although I have a lot of sympathy with this - building societies are still picking up the tab for failed banks today) all businesses need to face up to the challenges, take some tough decisions and define a strategy to see them through these difficult times. Brokers need to adapt to this market. The tightening of rules and the likely changes to interest only mean that the importance of advice for many borrowers is as important as ever. Those borrowers who took an interest only loan and in the future find that they can’t remortgage will need someone to walk them through their options. Finally, I would imagine that any responsible mortgage broker under the new regime will want to be confident that their client can afford the mortgage and has all of the documentation to meet the criteria of the lender.


It seems to me that we need to get back to something that was often overlooked in financial services in recent years, and continues to be by some large banks - customer service. n


mortgAge introducer AUGUST 2010 29


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