This week it surfaced that the firm, currently registered at the domain SelfCert.co.uk, will base itself in Eastern Europe to sidestep UK regulation but will still be allowed to offer loans to UK consumers.
Self-cert mortgages, which were designed for self-employed borrowers, were banned by the Financial Conduct Authority (FCA) as a result of its Mortgage Market Review (MMR) implemented last year. The loans were particularly popular in the build up to the financial crisis and were criticised for making it too easy for borrowers to inflate their income to obtain a mortgage.
Tom Cleary, financial services director at Start Financial Services, said consumers should be concerned about dealing with a lender that is not authorised to transact business in the UK.
“I don’t personally believe self-cert has a place in the mortgage market anymore. This to me sounds like a deliberate attempt to circumvent MMR,” he said.
Graeme Wingate, who is in charge of setting up the new self-cert business, told Mortgage Solutions that regulation at the lender’s headquarters meant that it would not be required to provide mortgages on an advised basis. Wingate would not disclose the exact location of where the lender will be based, explaining that he did not want the FCA ‘having a quiet word’ with the foreign regulator.
Cleary criticised Wingate’s view that offering loans direct to consumer would be more secure.
“I know he [Wingate] has levelled the blame of self-cert abuse at brokers, which is ridiculous because you can’t abuse something if it doesn’t exist. In the past lenders would provide these products and we used to have BDMs approach us and lie about the borrower’s income.
“For brokers, MMR was manna from heaven because it banned non-advised sales and in turn drove the market back in favour of intermediaries. Clearly as an intermediary I’m going to be against anything that flies in the face of that, but I do genuinely believe that the only way you should arrange a mortgage is on an advised basis,” he added.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), said schemes that bypassed the need for advice should be avoided.
“While innovative, it may not be in the best interests of consumers,” he added. “Approaches which require consumers to be able to undertake execution-only transactions in the complex world of mortgages should in our view be avoided.”
Coreco director Andrew Montlake voiced similar concerns, adding that there should be thorough checks of a borrower’s background in such circumstances.
“The phrase that comes to mind is “what could possibly go wrong”. Unless there are some pretty rigorous checks it can be very dangerous for borrowers to potentially obtain a mortgage on a self-certified basis without any advice or any regulatory protection,” he said.
“I would strongly urge any borrower to think twice, then think again and take professional advice before taking this route into the property market.”