Most brokers firmly believe that hunting for bad apples will see the investigator come up trumps, while others believe that self-certified mortgages are a recipe for disaster with both borrowers and brokers relishing the opportunity to push the boundaries as far as they can.
The motives behind the investigation aside, one of the big questions thrown up by the programme was overvaluation of the housing market as a catalyst.
Both brokers and borrowers are increasingly backed into a corner when it comes to getting a suitable mortgage offer, with affordability decreasing and criteria undergoing serious tightening of late.
Over-exaggeration of income is always going to be a problem, whether the situation at hand is applying for a home loan or having an informal chat with friends – the big issue being that the former is fraudulent and could lead to severe financial difficulties and ultimately repossession.
Bravado aside, no one wants to lose all of their monthly income paying back their mortgage. Chris Cummings, director general of the AMI, believes this is only the case for a relatively small number of consumers due to the popularity of self-certification mortgages which account for less than 5 per cent of all intermediary mortgage advice.
However just because the market is small, does not mean that brokers should be encouraging their clients to lie to get the home they want – a stance which many in the industry would wholeheartedly support.
“We do not condone any brokers who encourage consumers to make fraudulent applications,” said Cummings. “As a trade body we have produced guidance on self-certification products and encourage all brokers to carry out due diligence.”
Peter Williams, executive director of IMLA, supported Cummings, calling the angle taken by the programme “sensational and alarmist” while refuting the suggested ubiquity of these underhand practices.
The implied weakening of regulation within the industry is also something Williams spoke out against, saying: "Across the sector, sound underwriting procedures are applied in accordance with best practice and the regulatory principles of the FSA, including the obligation to treat customers fairly. Many thousands of borrowers use this type of product every year without any problem.
“The intermediary based lender sector remains committed to continuing to help legitimate customers use the self-certification range of products when appropriate, and will work with the FSA, AMI and other interested parties to ensure that the highest standards are maintained in this sector of the mortgage industry.”
So who does it fall to to ensure that these practices are being adhered to? Cummings believes it is a three-way relationship between lender, broker and consumer where all three should assume responsibility for their own actions.
This said, the emphasis on responsible lending in the self-cert mortgage market is undoubtedly stressed. If the broker has to place their trust in the honesty of the borrower’s answers then it is the lender who should be ensuring that the correct plausibility tests are in place to check a consumer’s overall suitability. In the case of their word against yours, it is imperative that no stone goes unturned.
