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It’s right to flex criteria for mortgage prisoners, but what about the rest? – Bamford

by: Patrick Bamford, business development director at AmTrust Mortgage & Credit
  • 22/07/2019
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It’s right to flex criteria for mortgage prisoners, but what about the rest? – Bamford
There can be few in our industry not embarrassed by the existence of mortgage prisoners or the fact it has taken so long to reach the point where they might be helped out of their predicament.

 

It hasn’t been for the want of trying by the many organisations and individuals who have highlighted their plight, its inherent unfairness and the actions that should have been taken many years ago.

Part of me that believes the help that appears to be being afforded them now is better late than never. Then I look at the situation with Tesco Bank and its mortgage book.

Tesco Bank has made no commitment to sell to a going-concern lender and we could be in danger of again creating a swathe of issues and more prisoners if the sale does happen in such a way.

It’s ironic that though the industry, government and regulator are attempting to find a solution to the current mortgage prisoner issue, there appears to be nothing in place to stop future borrowers being incarcerated in a very similar way, by dint of a mortgage book sale.

Given the nature of the market at present, who would bet against more lenders seeking to leave the sector, stopping lending and finding an organisation willing to buy the book which does not currently lend?

This would present issues because of the commercial nature of its sale, rather than what we have within UK Asset Resolution, the government-owned holding company for NRAM and Bradford & Bingley.

One wonders how the powers that be might tackle such a situation and whether a lender such as Tesco Bank would be placed under any pressure not to sell to an inactive or unregulated lender — or indeed to a business that does not lend at all.

 

‘Disassemble affordability models’

It was interesting to hear the views on this matter of Robert Sinclair, chief executive of the Association of Mortgage Intermediares (AMI) at the organisation’s annual dinner.

He spoke of the potential for an “uneven playing field” with lenders potentially having to “disassemble their affordability models for those prisoners to remortgage”, as well as how larger lenders might be less able to rework their systems compared to smaller lenders that rely more on manual underwriting.

Some might suggest this is not an issue.

But what we as an industry are unlikely to want, is those prisoners moving to deals with smaller lenders, which are potentially not as suitable as loans they might be able to secure with the bigger operators, simply because the latter group cannot get their systems up to speed in time.

It’s a very tricky conundrum to work out.

 

Affordability loosening for other groups?

There might well be arguments from certain potential borrower groups – dare I say it, first-time buyers – who see affordability criteria potentially being flexed to, quite rightly, help mortgage prisoners, and wonder why they’re unable to access the same lender largesse?

Especially in a first-time buyer market which increasingly leans towards those who have access to parental help.

What about those who are not so fortunate? Might they not welcome a slight shift in affordability criteria, especially if it might get them onto the first rung of the property ladder?

It will be intriguing to see how this plays out in practice and how many prisoners, who have previously been deemed borrower non grata, make it out of their current predicament to a lender and product which is more suitable and, importantly, saves them money.

Following on from that, might other borrower groups also seek a similar affordability loosening in order to help them move, too?

 

 

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