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FSE 2014: Lenders ‘filled their boots’ on non-income verified sales pre-MMR

  • 24/09/2014
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FSE 2014: Lenders ‘filled their boots’ on non-income verified sales pre-MMR
The Financial Conduct Authority (FCA) believes mortgage lenders ‘filled their boots’ with non-income verified sales in the run-up to the Mortgage Market Review implementation.

Lynda Blackwell, mortgages and mutuals sector manager at the regulator, told the Financial Services Expo in London that there had been a sharp rise in the number of non-verified cases in the weeks leading up to April 26 implementation date.

“Just ahead of the MMR coming into force we saw an increase in the number of mortgages where income wasn’t verified with 20% of mortgage sales in Q2, that’s around 52,000 mortgages, being sold without income being verified,” she said.

Blackwell said this was a large increase compared the start of the year and that these extra cases had largely been completed through the intermediary channel.

“That’s up from 16% in Q1 so it looks as though there was a bit of a filing of the boots going on immediately before it was all switched off on April 26.

“In Q2 there were still 39 lenders in the market, 28% of lenders, reporting mortgage sales where the borrower’s income was not verified. The majority of sales, over 60%, were sold through intermediaries and there was a sharp pick-up in the last quarter before it was closed.”

Later, Blackwell said she was disappointed with the number of lenders failing to use transitional arrangements offered to them and instead insisting all product transfers and porting deals undergo a full affordability check.

“Lenders are applying the affordability rules when there is strictly no requirement under the MMR for them to do so,” she said.

Blackwell added: “It is disappointing that some lenders are not approaching the rules in the spirit of which they were intended and they’re not using the transitionals to help out consumers when they could,” she said.

“We expect firms to put good outcomes at the heart of everything they do. Leaving customers stuck on higher rate deals when the option exists to move them on to one that costs less is not putting the customer first.”

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