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Do you expect to see less or more second charge mortgage lenders in 2018?

Fluent: Regulation not to blame for rigid underwriting


Advisers should not think that nothing more can be done for clients when lenders tell them that regulation is responsible for the increasing number of mortgage cases that fall through at the underwriting stage.

This is especially true for capital raising cases when brokers ought to be considering a second charge option.  

While regulation has rightly made all lenders take stock of their underwriting procedures, it's wrong for first charge lenders to use the excuse that regulation is to blame for cases falling through.

Of course, there was always going to be a tightening of criteria and lending policy, but the more I hear that regulation is to blame, the more it seems to sound like the current trend of placing every problem at the door of the Brexit vote.

The truth is that regulation is all about interpretation rather than hard and fast rules. Unfortunately, many first charge lenders have conveniently decided that if they say ‘no’ more than they say ‘yes’, they are unlikely to fall foul of the regulator.

The concept of having faith in the quality and experience of underwriters, their interpretation of lending policy and the regulatory framework has been substituted by many lenders with wholesale reliance on credit scoring, computer generated underwriting and general box-ticking.

Thankfully, second charge lenders have demonstrated a more measured approach to regulatory requirements. While they have positively adjusted their underwriting and criteria, they have largely been prepared not to go down the computer driven path like their first charge counterparts and stayed loyal to a more human approach of looking at cases in the round, rather than making them conform to a rigid template. 

I would urge more advisers to be sceptical about those lenders that look to blame the regulatory structure to cover their own over cautious underwriting approach and compare it to the confident yet compliant alternative offered by the second charge sector.

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