Tuesday, Oct 13, 2009
Latest CML comments on Self Cert
Mortgagestrategy: Self-cert should not be banned, says CML
Banning self-cert mortgages would exclude borrowers that legitimately use the product from the mortgage market or result in them being trapped in their current mortgage, says the Council of Mortgage Lenders. The CML made the comments as part of its submission to the Financial Services Authority ahead of the publication of its Mortgage Market Review - expected next week. This week's Mortgage Strategy reports that week that rumours are rife that as part of the review the FSA will ban self-cert mortgages. But the CML says it considers self-cert a valid niche product for those that have irregular income or cannot verify their income from employment.
Posted by jack c @ 04:34 PM (1124 views) Add Comment
18 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. mark said...
I agree there is no valid reason to ban them
maybe what they should do is limit the lending on them, maybe limit it to people who are genuinely self employed
i think what they should do is raise interest rates, to get us out of this financial circus
2. greenmind said...
I would have thought there is a glaringly obvious reason for banning them: because some applicants lie about their income and it isnt possible to tell if they are lying or not. And by lying they run a bigger risk of defaulting. And because the tax payer ends up bailing out the banks that have taken undue risks. If this last werent the case, then there might not be a valid reason for banning them because it would be the banks that would suffer in the end. But this is the case ...
3. doom&gloom said...
Seems strange to talk of 'banning' self-cert mortgages. There are plenty of mortgage products for people without permanent employment - they just need bigger deposits.
4. the number cruncher said...
They are a valid product so no they should remain for real self employed. But they should not be an excuse for not checking income or lenders not taking responsability.
But...
Those banks should be liable for not checking the brokers - as they have not taken sufficient care before they made a loan
The brokers should be liable for blatant cheating by telling people to fill in the forms - they should be sued by the banks
the borrowers should be liable for lying
At the moment they has been the most colossal fraud happen and everyone is getting off Scott free. The law must be enforced over the many tens of thousands of fraudulent loans transacted over the last 10 years
5. the number cruncher said...
They are a valid product so no they should remain for real self employed. But they should not be an excuse for not checking income or lenders not taking responsability.
But...
Those banks should be liable for not checking the brokers - as they have not taken sufficient care before they made a loan
The brokers should be liable for blatant cheating by telling people to fill in the forms - they should be sued by the banks
the borrowers should be liable for lying
At the moment they has been the most colossal fraud happen and everyone is getting off Scott free. The law must be enforced over the many tens of thousands of fraudulent loans transacted over the last 10 years
6. uncle tom said...
Some people are eternal optimists, who can talk themselves into believing that they will earn more in the future..
..and thereby talk themselves into a miserable financial position
What is needed is to arrange for the HMRC to issue certificates of past declared income, and use that as the basis for calculating income multiples, when the applicant has an unfixed income. That can apply to those who have used self cert previously as well as new mortgage applicants.
And if someone lied about their income in the past, why should they deserve special favours now?
7. Saintjay said...
Perhaps they could help themselves (the borrowers) by keeping their records and actually paying some tax.....
8. tenyearstogetmymoneyback said...
Self certification Mortgages should be replaced by Tax Office Certified Mortgages.
If the tax office cannot say how much someone earnt in the last tax year there is a serious problem.
If an applicants salary is so variable that they don't think last years figures are reliable then should they
be given a mortgage ?
If they did this then it wouldn't make any difference if the person was self employed.
9. tenyearstogetmymoneyback said...
Just noticed I have almost repeated what Uncle Tom said.
However, I have brought this up many times. Going back to
Number Crunchers comment I also belive that the Tax Office should
go back through all the self certification mortgage applicatiosn to ensure
that the correct tax was paid on the incomes declared.
It is thanks to these fraudsters that house prices are out of the reach
of lots of Honest people.
10. jonb said...
Tax office certified mortgages won't work because people can and do over-declare their income to HMRC in order to be able to borrow more money. Yes, it means a higher tax bill, but as the tax bill is paid for with borrowed money and not their own money, they aren't too worried about that.
11. inbreda said...
jonb - that could hardly be considered a worse situation with the "make it up" situation that has been going on for 10 years. Imagine - people overpaying tax. It doesn't help them repay their loan or make their company profitable so I think the cases would be few - and short lived.
12. jonb said...
I work as an accountant, and I see more people, a lot more people, overstating their income in order to borrow more money than I see understating their income to pay less tax.
If you have a limited company, which most business of any reasonable size do, then the credit check will include details from the accounts filed with Companies House. I've never seen anyone try to file different accounts with HMRC from the ones filed at Companies House.
13. crunchy said...
7. Saintjay said...Perhaps they could help themselves (the borrowers) by keeping their records and actually paying some tax
LOL
14. jackas said...
I did a bit of market research myself the other day - phoned up a few brokers for a self cert with no good reason to get one.
These guys are on tenderhooks - they nearly drop the phone when you even hint at the fact that you can't prove your income for any other reason than you are genuinely self employed.
They won't even talk to you unless you make a good case - ironically you have to certify that you are self-certify.
Progress.
15. Chubby said...
You can sell people whatever they like, if they are stupid enough to take money they can't afford to pay back, thats their call. Bankruptcy should make them pay for that (it does in every other country)
The problem comes at the other end of the chain. If banks had to hold the debt they create then they would be very careful about who they are lending it to. This itself would regulate the market. Instead we have this stupid situation where bad debt can be sold on blindly and favourably. If this story had been allowed to play out it would have looked very stupid indeed. Instead the banks were bailed out and tax payers money continues to lubricate buying and selling of bad debt (albeit at a slow rate for now).
And we begin having stupid discussions about who we should lend how much to... its simply dumb.
If i could lend all my savings to a stranger who i knew nothing about at a good rate of return and have it fully refundable from the government if anything went wrong..... would i?........ Kin right i would.
Its just an ever growing gravy train. All aboard!
16. Neil B said...
@jackas - there is no valid reason for a self employed person not being able to prove income. Mortgage lenders require a copy of your accounts from the last 3 years. This is standard practice. To state that you cant provide these figures sounds 'well dodgy' to say the least.
17. house said...
@12, jonbsaid
You say that you work as an accountant and many people over declare their income to obtain loans. If my understanding is correct, the lenders normally asks for 3 years income (accounts). Normally the tax calculations issued by the tax office. This means that the self-employed would have to overstate his income for 3 years, that means he would have to plan this over a 4 year period. This appears to be a bit far fetched. Also in the 4th year he would be declaring the correct income ( I can only assume a lower figure) and I am sure the Tax Office would have something to say about it.
18. Bloggins said...
Lenders do not understand fully how people's income arises - self certs were a dangerous and lazy way of processing a mortgage application. What is needed is a mortgage provider that can accurately guage affordability for applicants - perhaps a three year cashflow projection taking applicants through a sane budget process. Yes it would take longer to process and it would need a face to face interview with a member of the lenders staff. They used to call him/her branch manager.