This is a scenario of many who are applying for self cert mortgages. It may seem like a great way to get credit when you can’t afford a mortgage, but the reality is that you could end up losing everything including your home.

Self cert mortgages are designed for people who cannot prove their income, like an actor or a freelancer, but in recent years and with the credit culture that we have farmed they have slowly become known as ‘liar loans’.

Case in point…

Keith has a credit card, but the limit is just £200 and he has numerous CCJs against his name. Keith is not surprisingly, continuously late with payments for loans and monthly payments that he has to make. Half way into the month Keith is usually most of the way through his wages, so uses his credit card to tide him over until the next pay day.

Despite the problems that are already facing Keith he has opted to go for a self cert mortgage and has applied for a self cert mortgage stating that he earns £100k. Keith went to a lender that he knew would not question his earnings and managed to secure a mortgage for £300k or more.

Self cert mortgages have been heralded as ‘liar loans’ and many mortgage brokers are loathe to touch them. At Click n Go, we pride ourselves on making sure that our clients are well qualified and make sure that they fully understand the ramifications of not being able to repay their mortgages.

You may like to think that ‘Keith’ is a made up scenario, but in recent findings that we have previously talked about in our blog the FSA found the several mortgage brokers were not giving good mortgage advice. We are appalled by this practice and want to make sure that our customers are not only aware of this practice but also understand the mess that it can land them in.

If you want to talk to someone about a self certification mortgage and your options, then get in contact with us today.

We recently reported the story of a mortgage broker who was fined £10,500 for what was seen as fraudulent self cert mortgages.

The FSA have fined the mortgage broker, following what they have seen as unsatisfactory income checks being carried out on self cert mortgages, which has sparked a debate amongst mortgage brokers and who is really responsible for self cert mortgages.

A mortgage broker will advise you on what you can afford and the risks involved and what will happen if you do not keep up with repayments, so should a mortgage broker really be responsible post-sale? Or should the responsibility be with the lender or firmly with the self cert mortgage applicant?

What is also interesting, and should be considered, is that although subsequent checks may find that the applicant should not really have been awarded a mortgage, they may have been able to keep up with repayments. When applying for a self cert mortgage, you will be expected to sign a declaration stating that you can afford the mortgage, so whose responsibility is making sure that the mortgage is repaid? The lender has to agree the mortgage, so is the broker just the middle man and therefore exempt from any come-back if the mortgage is not successful?

The FSA view it as the responsibility of the mortgage broker as they are the ones who have advised the client when they applied for the loan and that the lender goes by the information supplied by them and therefore rely on to heavily when processing an application.

Many mortgage brokers have spoken out against this, especially as all self cert and fast track mortgages are still authorised by the FSA and not the sole responsibility of the mortgage broker.

The argument will no doubt continue, but what is clear is that when you are applying for a self cert mortgage, and ultimately cannot meet your repayments, it is your home that will suffer.

Cynical?

The cynics in the mortgage industry have been calling them ‘liar loans’, but for those who are self employed or have no actual documents to prove how much they earn, we will call them self certification mortgages.
As with standard mortgages, you fill in a form detailing how much you earn, but the difference being that you are not required to confirm how much you earn and the company providing you with the mortgage simply takes your word for gospel as far as how much you earn.

In the last decade self certification mortgages have become particularly popular, especially amongst people with ‘dodgy’ credit histories and this has in turn attracted the attention of the FSA.

Serious Failings

The US has been hit hard after sub-prime customers lied about their earnings in order to obtain self cert mortgages. Now the banks are in trouble and defaults have gone through the roof.

The FSA are now believed to have now found serious failings with the UK market, warning those brokers who are putting through ‘fraudulent’ self cert mortgages that they are being watched and monitored.

Back lash

With the credit crunch in full swing, self cert mortgages are being yanked from the market. According to reports there are now 186 self cert products on the market in comparison to last year when we have the choice of 1,704. The main reason for withdrawal of self cert products is that people who took them out last year can’t afford to pay them back and defaults are rising.

Bradford and Bingley are feeling it more than most on the high street and some £321 million of the self cert mortgages B&B committed to are now 3 months or more in arrears – this is up 37% from the end of 2007.

If you are looking for a self cert mortgage, then consider what you can afford and we will advise you on the best product for you budget.

Bradford & Bingley have announced a hike in their lending rates for standard mortgages, self cert and buy-to-let mortgages.

The news that Bradford & Bingley are to increase rates comes after Abbey also hit out increasing their rates by 0.26%, however, B&B are looking at a figure that is to be anywhere between 0.05% and 0.55% for some of its mortgages.

Those with Self Certification Mortgages are likely to feel the pinch of the increase in rates at this time.

Bradford & Bingley have said that this is part of their normal business activity, but this has seen them reprice all of their mortgages on a monthly basis for the past year and a half. This comes after the announcement that B&B have racked up an £8 million pre-tax loss from January to April of this year, which adds to the £89 million from the credit crunch squeeze and then £36 million from increasing arrears.

All lenders are feeling the crunch, but there are still some very good and competitive rates available and being self cert doesn’t mean that you are not going to be able to find one. Mortgage Brokers have the niche in that they can search the whole market to find exactly what is right for you and at a rate that reflects suits you.

Contact us today to see what we can do for you >>

Mortgage advisors have hit out against the self cert mortgage fraudsters after the FSA clamp down.

Mortgage advisors have asked the FSA for help in fighting back against the self certification mortgage fraudsters.

In a recent Q and A session with the head of the financial crime policy at the Financial Services Association, mortgage advisors have voiced their concerns over self cert mortgages and fast-track sectors of the mortgage market.

One advisor talked of his experiences in not being able to help a customer, and then learning that they had managed to do a deal with another lender. This obviously lead him to believe that perhaps they have indeed changed some of the information that they originally were using to apply for the mortgage with.

With lenders taking full responsibility for approving mortgages based on the information supplied being true, lenders have a lot on their shoulders when they come to agree a self cert mortgage.

A lender described it as someone giving someone else a gun to rob a bank with and then saying that it is not their problem.