During a speech published by the Social Market Foundation (SMF), Stephen Knight, executive chairman of GMAC-RFC, stated the old fashioned method of manually checking income fails to determine real affordability and leaves consumers at greater risk of falling into arrears. When comparing its arrears statistics to industry figures produced by the Council of Mortgage Lenders (CML), Knight claimed GMAC-RFC consistently out-performed the industry, despite the fact that its lending includes a higher sample of niche buy-to-let and self-certified borrowers than the CML sample.
Prime lending, serious arrears
- GMAC-RFC - 0.40 per cent
- CML industry figures - 0.40 per cent
- GMAC-RFC - 5.0 per cent
- Fitch Index - 9.0 per cent
The figures were first made available at a GMAC-RFC sponsored debate on responsible lending held by the SMF. The event was chaired by Rt. Hon. John McFall MP, chairman of the Treasury Select Committee. Fiona Price, director, cross market interventions at the DTI and Peter Tutton, social policy officer at the Citizens Advice Bureau also spoke at the event.
GMAC-RFC claimed the statistics present tangible, real evidence to show that establishing an income down to the last penny and applying arbitrary income multiples have little to do with consumer protection and advantage. Automated underwriting removes the risk of human error and helps lenders to determine the attitudes of borrowers towards repaying debt. This is the best way to assess an individuals capacity to repay a mortgage and manage debt.
Knight believed those involved in the industry need to keep communicating in order to help solve the problem of establishing affordability. He commented: “Lenders have a duty to treat their customers fairly but many simply do not understand the impact antiquated underwriting systems have on arrears.”
Commenting on why GMAC-RFC sponsored the event, Stephen Knight said: “Lenders will always benefit from hearing how their products, policies and actions impact upon the lives of consumers. This can only be achieved through constant communication with MPs, consumer groups and others exposed to the industry. Considered, lively debate where each individual spends most of his time listening to the thoughts of others is the best way to solve most problems.”
