Under MMR, mortgage intermediaries are responsible for ensuring mortgage applications are submitted which meet the ‘lender’s expected affordability criteria’. This term is not defined – so what are we to think? Does it mean simply the criteria by which sourcing systems operate – LTV limits for example?
Probably not – that is too basic. So does it more likely mean the criteria of a lender which sit behind the headline product – what income, debt and expenditure requirements there are, whether the product is available to first time buyers, etc? If it is this latter, more likely requirement, exactly where does an intermediary get this information and how can they prove these were the criteria in place at this exact time on this exact date?
At present, an intermediary wishing to have a complete file to be able to demonstrate to the FCA they have chosen the best deal for his client, can take a screen shot of the sourcing results. This will show, date and time stamped, where the top products were selected from. A clear, date stamped record, which can be held on file.
No such ability exists for ‘lender’s expected affordability criteria’. Lenders are inconsistent. They publish their criteria in different formats and on different systems – some on the sourcing system notes pages, some on their own websites. There is no industry standard format. Some are short and succinct and some are very long and detailed. Some, very few in our experience, are dated. And the situation is worse where the notes say ‘refer to lender’ – for more complicated affordability issues.
So here we are, five months away from MMR day and we do not have the answer to this question.
There are some further issues stem from this – for example, how will an intermediary record a case where, after discussion, the lender has accepted it, but outside their ‘expected criteria’? What will the lender give the intermediary to show they were happy with this case?
So, a plea to the lender fraternity: can you please start talking to each other about this and come up with a simple, industry view and ideally, a standard format for publishing your criteria? It’s not much to ask.
Stephen Smith is director of housing and external affairs at Legal & General