How to think like an underwriter: assessing bank statements
We are having to spend more time with clients going through their bank statements with them at interview stage now as some lenders are coming back with questions about minutiae on the statements and so not only does it save time later if the lender asks questions about items but in some cases it will influence where we place the case.
Examples of items on these statements which may cause an issue with some lenders in terms of the affordability assessment include a monthly standing order to a child for pocket money and charitable direct debits. Although the costs of children are already taken into account in the affordability assessment our experience is that some lenders will double count the pocket money as a cost simply because it is paid by standing order (but wouldn’t if it was paid in cash).
Likewise charitable donations may be treated as a commitment if paid by direct debit. The treatment of items like these varies from lender to lender with some taking a common sense approach but not others.
Depending on the amounts involved, the client’s credit score and how close they are to the maximum amount a lender will offer, in some cases it might be appropriate to advise a client to discontinue all direct debit charitable donations a few months prior to applying for a mortgage so that even small and affordable regular payments like this don’t either prevent them from getting the mortgage they want, or may only allow them to get a mortgage at a higher rate, in which case they might in any case later have to cut back on things like charitable donations.
Martin Wheatley claims that the MMR has hard wired common sense into the mortgage market, whereas what it has actually done is the remove much of the common sense which the market was already displaying, particularly with the “computer says no” lenders.
I wonder if the possibility that mortgage advisers may have to advise some clients to cancel, or at least suspend, their charity direct debits in order to secure the mortgage they want, and can easily afford, is an unintended consequence of the MMR or had Mr Wheatley realised this may happen and factored it into the FCA’s thinking when the MMR rules were devised!.
Ray Boulger
Regulation of family buy-to-let called into question
Of course BTL mortgages should be fully regulated just the same as residential mortgages in order to stop fraud and protect the lander. Doug Hall should be more worried about the Bank of England stress testing the Banks as this is the obvious precursor of £9 billion subsidy to the BTL market being reduced probably after the next general election.
I would suggest that all Landlords start to reduce their property portfolios as the 16% annual yields they have been enjoying has not gone unnoticed by the Treasury and the politicians.
The sooner this mortgage subsidy landlords is reduced and the property market goes into deep freeze for a few years the better it will be for FTBs and the economy in general..
Colin Cloy
Regulation of family buy-to-let called into question
Fraud is illegal if BTL is regulated or not. Lenders welcome BTL business, not sure what you want to protect them from?. Asking for more post MMR.
I think you overlook that regulation is primarily to protect the consumer (landlords) not banks. The rest of comment is the usual anti landlord political propaganda found on far-left websites. Successive Governments have pulled out of providing rented housing. Entrepreneurs step in to fill the gap.
Adam Hosker
Regulation of family buy-to-let called into question
I work in the North West and lenders have never been able to tell if a family member will live in the property as 60% on my clients even when married don’t have the same surname and many live at different addresses in family houses containing as many as 10 members.
Try regulating this market as I can’t and I’ve known most of these clients for 20 years.
Dougie
Post Office to launch intermediary mortgage channel
Good to see MMR having an immediate positive effect for our business…
Good Mortgage Man
Thank you for your comments this week
