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The changing face of non-standard mortgage lending


The changing face of non-standard mortgage lending

 

The Intermediary Mortgage Lenders Association has released a paper focusing on the changes occurring within the non-standard mortgage lending market.

In summary the body claims that although all mortgage borrowers have been affected by the financial crisis, the non-standard debtors are the ones who have faced the greatest impacts.

Self-employed borrowers have been affected least by MMR externally, but the additional complexity in measuring cash flow coming in and out makes it harder for bigger lenders to judge them the paper proposes, which could increase the role played by smaller lenders in the segment.

Also, the elimination of self-certified loans has decreased options for new freelancers who lack having several years of accounting documents readily available.

Those with bad credit have also been less affected by the MMR, with one exception being heavy adverse credit. 

The MMR has had a more noticeable impact on the lender’s decision regarding loans which are likely to remain unsettled after retirement. Many lenders believe that lending into retirement now carries additional risks as the MMR requires that lenders ensure that the loan is affordable so some debtors may find their retirement income insufficient.

Borrowers with substantial resources are at a possible disadvantage as these assets carry no weight in the MMR's affordability calculations.

The paper concludes that fewer and fewer borrowers fall into the old-fashioned ‘salaried person’ category, with no credit imperfections. 

The UK mortgage lending industry is normally able to meet the needs of an increasing number of non-standard debtors and the MMR has mostly not prohibited lenders from continuing to service these borrowers.   

However, the paper says that conduct hazards associated with MMR rules which could be interpretted differently by the regulator in the future, are a real worry. 

The association signs off by mentioning that the solution must stem from more lucidity from the FCA about the limits of permissible practice and it must be hoped that next year’s review will provide this greater clarity. 

 





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