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Pepper tightens income evidence requirements and rejects furloughed borrowers

  • 04/06/2020
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Pepper tightens income evidence requirements and rejects furloughed borrowers
Pepper Money has significantly tightened its income criteria for buy-to-let and residential borrowers, including greater evidence for self-employed customers and those remortgaging.


The lender wants brokers to supply evidence that residential remortgage applicants are “not experiencing financial difficulty”, and remortgaging landlords must be receiving rent from tenants.

Pepper is also not accepting any mortgage applications from borrowers who are receiving financial assistance through either of the government’s income support schemes.

These are the Coronavirus Job Retention Scheme (CJRS) for furloughed employees, and the Self Employment Income Support Scheme (SEISS) for the self-employed.

Furthermore, it clarified the limitations for borrowers on a mortgage payment holiday with their current lender. Pepper will not accept buy-to-let (BTL) purchase or let-to-buy applications in this scenario.


More questions and evidence

The moves were part of a wider criteria update published by the lender that also covered detailed requirements for self-employed income.

The lender’s notification said: “At Pepper Money we believe it’s important to be transparent about how we assess your clients’ applications.

“Due to the on-going effects of Covid-19, we have made some changes to our underwriting requirements.”

It added that “all applications will continue to be manually underwritten and we will be taking into account the current economic environment. This is likely to lead to an increase in questions and/or evidence requested.”


Self-employed accounts

Self-employed applicants will now be required to produce full business accounts.

Pepper said that SA302s will only be accepted in addition to the full business accounts.

SA302s are not acceptable proof of income on their own but will be requested where the accounts have been prepared by an accountant who does not appear on our list of accepted qualifications.

It may also ask them to confirm dividends which do not appear in the business accounts.

Pepper also explained the further evidence needed to confirm mortgage and rental payments for remortgage applicants.

“For residential remortgage applications, we will require you to verify that your customer is not experiencing financial difficulty and is able to meet their monthly repayment,” Pepper said.

“Please supply a copy of the latest bank statement evidencing payment of the last month’s mortgage payment.

“For BTL remortgage applications, you will need to verify that your customer has been receiving rental payments from their tenants.

“Please supply a copy of their bank statement evidencing receipt of the rental payment for the last month, in addition to a copy of the assured shorthold tenancy (AST).”


Responsible lending

Pepper Money sales director Paul Adams told Mortgage Solutions: “The economic outlook remains uncertain and so, as a responsible lender, it is only right that we apply the appropriate level of underwriting scrutiny to applications to fully understand individual customer circumstances.

“It’s also important that we are completely open and upfront with brokers, which is why we have so clearly communicated the guidance to which our underwriters are working.

“Our approach to lending remains fundamentally the same as it did prior to the Covid-19 crisis, with hands-on underwriting to provide easy and affordable solutions for clients with complex circumstances, but there must clearly be some extra considerations made as part of the lending process, and it is only right that we are transparent about those considerations.

“While we must be mindful of the uncertain economic environment, we are also very positive about the future and have a number of exciting plans in pipeline to expand and extend our proposition into new areas, so watch this space.”




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