They highlighted that bounce back loans and mortgage holidays are eventually being discovered in bank statements and being upfront could actually benefit someone seeking mortgage finance.
Weeding out information
Although brokers said they were always clear to their clients about the importance of being honest about any support taken, some said it took a while to get the information out of them.
Rachel Dixon, mortgage adviser at RH Dixon said she found clients were just not telling her about any payment holidays or other support, and it was taking “a few conversations” to be revealed.
Moneysprite director Ashley Brown, said he had no doubts brokers were “explicitly relaying” to clients how essential it was to talk about any financial assistance but added: “We have seen several clients at fact find stage choosing to ‘forget’ about support they have received and not declaring this.”
Lack of understanding
At the start of the pandemic, brokers warned that mortgage holidays should only be used as a last resort, but it appears some clients did not understand the seriousness of what the loans and payment breaks meant for the long-term.
Adam Wells, co-founder of Lloyd Wells Mortgages, said: “I believe that clients aren’t trying to be underhand, but actually aren’t aware of what information lenders require.
“The information is hard to find from the lenders and a lot of assumptions are being made.”
Others felt the ease with which some loans could be taken, as well as the attitude that they were there for anyone who needed it led some to seek all the support they could to protect themselves from the effects of the pandemic.
Christopher Hall, head of operations at Mortgage Guardian, described a self-employed builder client who admitted and agreed to cancel an application for a mortgage holiday after he was told it might make him look like he was in financial distress.
However, once it came to the underwriting stage of the case, it turned out the client had taken out a bounce back loan as well as other support he felt he was eligible for.
Hall said: “He just threw mud at the wall and hoped some of it would stick when he applied for support and thought the lender wouldn’t find out.”
Payam Azadi, director at Niche Mortgage Advice, said many borrowers took out support loans because they were low priced and had an interest-free period.
“It’s a mindset thing,” Azadi added. “Until they repay the interest, they don’t see it as a loan and don’t believe they have any credit commitments that need disclosing.”
Lender peace of mind
In other instances, some may hear of applicants being rejected due to mortgage holidays and decide not to share the information as they feel it would work against them.
However, brokers say this is often not the case.
Brown said clients may be trying to “play the system” by not mentioning help received but cautioned that it would always be uncovered.
“Lenders are realistic about the present crisis and do try to underwrite the risk fairly in my experience, moreover the full facts at outset allow this to be done properly and without delay,” he added.
For Hall’s builder client, the lender found out about the bounce back loan just before it was about to complete on the case resulting in a declined application.
As the lender was the only one with criteria loose enough for his client’s circumstances, Hall was forced to try to make the capital raising application work. The lender ended up asking about the client’s upcoming jobs, management accounts and examined how soon he would receive further income.
With this additional information, the funds were ultimately granted.
Hall said: “It didn’t stop me being a little disappointed about the whole process because he withheld important information and he knew it.”
Honesty is best
Overall, brokers said being open was the best thing for any client who received support to do.
“We need the client to tell us exactly what the situation is. The good and the bad,” Hall advised.
“Because if there’s something that’s relevant and they don’t disclose it, it’ll lead to problems and declined cases,” he added.
As the criteria of every lender varies, Azadi suggested that even loans taken under company accounts should be brought up. He said any credit commitment could still be relevant as some providers were taking this into account when calculating affordability.
Brokers also said failing to mention any support often resulted in a waste of their time if an application ended up being unsuccessful or required further documents.
Brown said: “Accurate disclosure is essential when advising on and processing mortgages.”
