The one that is really starting to stand out however is the issue of stress testing. It is not stress testing per se that is the issue, it is the fact that so many lenders are withholding the stress test criteria that they are using so that broker do not have a fair representation of what measures the lenders are using.
As a result, when working out affordability for their clients the broker can only base their affordability checks on the published rate, but we know that lenders are using stress tests that vary from +1% to +8% of the published rate.
The consequence for the borrower is that despite meeting all affordability criteria asked for, applications are coming back as declined or for much lower amounts than the borrower has requested.
It hardly meets with the treating customers fairly guidelines to hide criteria on which a loan decision is made, especially if it leads to different lenders carrying out a number of credit checks that could then damage a borrower’s credit rating.
There is also a danger to brokers in the quality metrics stakes; this cloak and dagger approach to stress testing will inevitably lead to more DIPs being declined as brokers do not have full information before placing a client’s application with a lender.
As many lenders base their quality judgements – of both brokers and networks – on the level of DIPs that do not go through to completion, it could reflect negatively on their ratings and ultimately affect the level of proc fees that someone receives.
How can a broker make a qualified decision on where to place their client’s mortgage application if part of the information being used to judge whether the client qualifies is hidden from them? In order to treat both customers and brokers fairly, all stress testing information and criteria should be in the public domain and published on every lender’s website. Without it a broker is advising in the dark without all of the information to do their job.
Toni Smith is sales operations director at First Complete
