Consultant Zone

MMR – Regulators against self-certification

Recent Mortgage Market Review (MMR) consultations seem to confirm the regulators stance that self-certification mortgages should be consigned to history.

Rockstead has never been anti self-certification. In fact, our view has always been in line with the Financial Services Authority (FSA) initial consultations, which were announced in their ‘Dear Chief Executive’ letter in February 2004 (before they took over the responsibility for mortgages).

That letter predicated that genuine self-certification applications accounted for between 6% and 8% of the market and gave lenders guidance on how self-certification cases should be processed and how staff should be trained. Further guidance was issued by the FSA in November 2005.

Readers will not be surprised to learn that a significant percentage of the expert witness cases that Rockstead is and has been involved with, involve self-certified lending.

Having now reviewed hundreds of self-certification cases we conclude that many lenders simply ignored the advice of the FSA. Sadly, many files we have reviewed show clues (or multiple clues) that the income self-certified by the mortgage applicant simply wasn’t plausible, but the lender failed to spot the issues and, therefore made no further investigations.

It seems to us that the real problem with self-certification lending is not the concept at all but the way lenders policies were applied and the lack of will within the FSA to enforce their 2004 and 2005 guidance.

If you would like to discuss the types of clues we feel lenders should have been on top of please contact Brian Pitt or Nick Baxter.