The FSA Wants To Ban Self Certification

So the FSA want to ban self certification mortgages.

This to me appears to be no good thing.

What appears to have been missed in all of this is the fact that the self employed need lenders that understand the way they work and problems they face in running small/medium size businesses.

On the face of it banning loans where an income is not declared appears to be logical and in fact in may seem completely bizarre that we ever entertained the idea of no proof of income on mortgage applications.

We are forgetting that we will need businesses to expand and invest and recruit in the coming months to help us out of a recession.

We will need new businesses to be formed. Under this new proposal our banks (some state owned) will no longer support them? If you invest and your net profit falls for a year or so you will be deemed u mortgageable under these proposals?

How about if you own several shops and one is underperforming and it takes 12 months to close the shop, but having taken the tough decisions a business owner has to you will be declined a mortgage. This may be despite the fact that the net profit has returned to normal levels. Is this right?

How do you define income for the self employed? Are retained profit income? Dividends? If you split the income between husband and wife, how should this be viewed? If you carry a loss over in an accounting year that is offset against the current years trading (many businesses will be doing just this), should we be remortgaging these people?

We need our banks to support businesses and the owners of businesses. Historically (10-15 years ago) we had specialist lenders that were experts at lending in this market.

There were no great mountain of arrears and this is where we need to return to.
Properly qualified Senior Underwriters assessing applications is what is needed for this sector.

The very people that had the skills to underwrite mortgage applications properly have been replaced by computers and scoring systems. To make mortgages work in this is arena we need the human element brought back.

If we return to underwriting mortgages this will make mortgages more expensive as head counts go up and mortgages are priced according to the risk they pose to the lender concerned.

This could leave the self employed who need self cert with higher rates and needing bigger deposits to help lenders balance their risk.

But this sounds fair and sensible to me. Preventing new or existing business owners from having mortgages is completely un helpful and is definitely not what is required sits at the opposite end of the scale.

I hope they consult and then review and amend their recommendations based on their findings; failure to do so will put unneeded pressure on the housing market just as it appears to be steadying.

If you would like to discuss the implications these changes may have for you then contact http://www.house2housefinance.co.uk/.