In any field, there are normally specialist technical terms which exist as a sort of shorthandš among the initiated, so they can communicate with each other quickly and easily. From architecture to football, everyone who is in the know understands the terms used and can communicate from a common base.
Likewise, the intermediary mortgage lending industry has its own particular jargon and anyone from outside the industry who picks up a copy of Mortgage Solutions would be bemused by some of the terms they encounter. Even familiar terms such as CP98š PAIš MIG-free or CeMap are likely to mystify those who have never come across them before. The challenge here for mortgage intermediaries is to operate not only in the world of mortgage lenders, but also to communicate to the wider world of borrowers, where the categories used to describe them are little known and less understood.
The mortgage industry is currently awash with confusing and conflicting terms for borrowers, lenders and products. Many of these terms seem to have grown out of attempts to create classifications for borrowers with a history of arrears, CCJs and bankruptcy, and for those who have no such history but who have, nonetheless, been refused a loan from a mainstream lender. This is a good idea if it produces clarity. The problem starts when the names of the categories start meaning different things to different people.
Take the terms non-conforming, non-status, sub-prime, adverse credit, and impaired credit. Do they all mean the same thing? If not, where do the subtle differences lie and exactly which category does the client sitting opposite you fall into? My bet is that if you asked a dozen mortgage advisers they would all give different answers. If the terms can be confusing to advisers, what about the poor borrowers?
The pigeon-holing of mortgage applicants who cannot get a mainstream loan of one sort or another could soon become obsolete. If the industry is aiming to become more flexible and individual in the way it treats applicants, then why do we need this multiplicity of labels at all?
I propose it is time to rationalise these distinctions and simply call it mortgage lending. We will all be operating within the framework of statutory regulation within the foreseeable future, so all mortgage transactions should be transparent and accountable. Let’s stop inventing more confusing lending categories and get a bit more common sense into the system.
John Prust is sales and marketing director at Southern Pacific Mortgage Ltd (SPML)