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FSA seeks to ban self-cert loans
Monday October 19th 2009
Plans to ban self-certification mortgages have been revealed by the City regulator.
The Financial Services Authority wants an end to the home loans which allow borrowers, such as the self-employed, to declare how much they earn. It also wants to impose affordability tests on all mortgages.
The FSA also highlighted the danger of mortgages containing "toxic combinations" such as lending a high proportion of a property's value to people with impaired credit histories.
Other measures being proposed include bringing buy-to-let mortgages and all other lending secured on a home within the FSA's regulatory scope.
The regulator said it would be publishing specific proposals toughening up the rules on the way firms handle customers who are in arrears in January. Mortgage payment protection insurance can protect borrowers in such situations, who may have lost their job.
The FSA said the proposals, which were published in its mortgage market review discussion paper, reflected a shift to a more intrusive and interventionist style of regulation.
Under the moves being outlined, lenders would be ultimately responsible for assessing a consumer's ability to repay their loan, taking into account their monthly disposable income.
Firms will also have to verify all borrowers' income, putting an end to both self-certification mortgages, which were aimed at self-employed people with irregular incomes, and fast-track mortgages, under which people do not have to prove their income.
Copyright © Press Association 2009
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