The Watford-based lender’s Chief Executive Officer, Alan Margolis, says self-certification has become a discredited form of finance and a byword for imprudent, “eyes-closed” lending.“It is worth taking a step back and looking at what self-cert really means. The starting point is that somehow we had come to accept that it was perfectly normal for someone to apply for and obtain a loan without producing a shred of evidence to support their ability to afford the payments.
Mr Margolis questioned why it made sense to take someone’s word about how much they earned, when the potential consequences for the individual, their family, any tenants and the economy as a whole of the income assessment being wrong were so great. “The fact is that if you earn an income, however it is derived, you should be able to provide some evidence of it. If you can’t, the chances are that you are cheating. For the self employed who do not have the luxury of monthly PAYE slips, evidence could be in the form of bank statements, financial accounts or tax returns,” he said.
Mr Margolis stressed that the abolition of self-cert should not mean the exclusion from the mortgage market of those who fall outside the PAYE norm. Lenders need to ensure that non-PAYE borrowers who have no problem proving their income have access to mainstream mortgage products. More… “There is a flip side to the abolition of self-cert mortgages, which is that lenders must ensure that potential borrowers who fall outside the PAYE norm are both able to apply for and obtain mortgages and are not discriminated against rate wise. This means that lenders, like intermediaries, will have to do extra work for such applicants who will not require simple tick boxing, but properly considered analysis.”
As a specialist short term lender, Cheval’s underwriting process is geared to examine and verify all applicants’ stated income and expenditure within very short time frames to ensure that the loan proposition makes sense for both parties. Mr Margolis added: “Whilst one cannot expect mainstream lenders to work within the same time frames, the sound principle of lending to someone who can actually evidence their stated income holds true whatever the intended duration of their loan.”
