At a time when concern that borrowers are over-stretching themselves is widespread, new figures from the Council of Mortgage Lenders reveal that nearly a third of mortgages are approved without proof of income.
Mortgages for which a borrower’s income was not checked made up 28.3 percent of total home loans in the second half of 2003, the CML said in a newsletter this week.
The CML conducted a survey amid widespread concern that borrowers may be borrowing too deep and Bank of England warnings that the housing boom is not sustainable. Despite the high proportion of income non-verified lending, the survey did find that all banks were conducting credit checks.
The types of income non-verified (INV) lending falls into three groups:
-
Income self-certified loans
These are loans marketed by the lender as not requiring the borrower to provide proof of income.
-
Income non-certified lending
Loans where the borrower is not required to declare an income when making an application.
-
Fast-track lending
Mortgages stated by the lender as requiring proof of income but where, in practice, verification checks are not systematically made.
|
Income self-certified loans & Income non-certified lending |
12% |
|
Fast-track lending |
16.3% |
Self-certified loans are aimed at the self-employed and others who have trouble proving their income and are a very useful option for many people.
Of the 30 lenders that submitted information, 24 said they offered self-certification loans, and 12 reported that they operated fast-track lending.
Last October the Financial Services Authority investigated both self-certified mortgages and fast-tracking after a BBC programme raised concerns about whether there were adequate checks being made on these types of loans.
The FSA and concluded that there was no cause for concern at that time with their spokesman on Financial Crime issues, Philip Robinson, saying, "Self-certification mortgages can be appropriate in certain circumstances, although our review has shown they are a small proportion of overall lending. Lenders' controls appear to be adequate in this area."
Lender’s controls include fraud checks against systems such as Cifas and National Hunter, which pool information on fraud and detect inconsistencies in credit applications.
The CML pointed to these types of checks and the low level of arrears among INV borrowers as evidence that the system was safe.
Get
this news on your website !
Sponsored listings: