Damned if you do and damned if you don’t
Danny Robinson
I help brokers/introducers to identify and arrange Bridging, Commercial, Development and PBTL finance for their complex cases providing them with the benefit of increased income??& more free time.?
I am not one to usually champion lenders decision making or policies, I am however struggling to justify any merit in what John Stewart of the NRLA has stated within the attached article.
I cannot fathom for one minute why a lender would choose to lend to an applicant/landlord currently taking a payment holiday on their mortgage. Landlord’s that have done so out of necessity are not in any position to indebt themselves further regardless of how reliable their profile was previously and those landlords that have then chosen to take payment holidays without needing to do so have made a conscious decision to simply take advantage of the emergency measures put in place.
In both instances it would be irresponsible of any lender to allow clients to further increase their borrowings and I simply do not understand the NRLA position on this as it would appear to be a very justifiable reason for lenders to not accept applications in these instances. If you are unable to pay your mortgage commitment either out of necessity or choice, should a lender really be expected to lend to you?
The point that some landlords have in fact taken prudent steps to help their tenants by allowing either rent reductions or holiday rent payments is moot given lenders have also extended the landlord the very same option which in my opinion, is very much in the spirit of the situation. How then is not accepting new applications for further borrowing ‘not in the spirit of the special coronavirus measures implemented by the FCA and government’?
Far from being penal, lenders taking these measures are in fact supporting the client by not allowing them increased indebtedness at a time when they have demonstrated they cannot meet their current commitments.
I accept that there will be instances whereby portfolio landlords may have one or two mortgage accounts that are on payment holidays whilst still maintaining other mortgage accounts normally, and in these instances it would seem unfair for new lenders to judge the whole portfolio on this basis given that BTL and PBTL applications are already assessed, stressed and underwritten with void periods built in, but and it is a very big BUT, these are not void periods. These are exceptional circumstances introduced as emergency measures in very extraordinary times, who is to know whether the rest of a landlord’s portfolio may come under stress? where does the lender draw the line? ……. given the current climate one would have to say at application.
Although the FCA guidelines are clear on the use of payment holidays and the fact they rightly should not have any effect on the client’s credit file they do not go as far as allowing lenders to lend irresponsibly. To say that lenders are penalising these clients is wholly inaccurate, yes there should be no negative impact on the client’s credit file but lending blindly without recourse to a client’s financial worthiness would be totally inappropriate and irresponsible. The fact that credit files are not going to be effected by taking payment holidays does not therefore mean lenders should ignore a client’s financial position, lenders are simply assessing the strength of applications on merit and making decisions to lend or not lend on this basis, we should not forget that Holiday payments are temporary emergency measures which have resulted in many lenders having no choice but to implement temporary lending restrictions.
Please have a read of the article and feel free to let me know your views.
Resourceful & Highly Knowledgeable Mortgage Adviser to HNW & Portfolio Borrowers Commentator to the mainstream and trade press inc LBC Radio, BBC, Daily Mail, Mirror, Sky News , FT Adviser , i and many radio stations
4 年Some lenders are adopting a case by case analysis This is where the brokers earn their crust Not all people took loans or holiday because they were in difficulties Rightly or wrongly they were taken as a safety net approach “in case” things went pear shaped Not all businesses have been affected and some have as we know been totally demolished This is the time for lenders to support borrowers and be understanding yet fair without stifling the property market recovery on which UK plc depends upon
Area Development Manager at Kensington Mortgages
4 年Great insight, and a voice of reason. Not affecting a credit file isn't the same thing as not impacting an underwriters decision. Kensington Mortgages has and will continue to support BTL landlords through these choppy waters. But responsible lending remains the guiding principle.
Development Finance & Bridging Finance Lender | Homes Provider & Property Investor
4 年This is a time where manual underwriting comes into play. It should be case by case underwriting rather than a blanket approach. Many portfolio landlords were advised by lenders to take the holiday if tenants are furloughed due to uncertainty. This might be one property only in a portfolio and bank statements show no cashflow problems. What if the LTV is really low and payments could be capitalised? We should see the position from all sides and if we can mitigate risk then why not lend?
Co-Founder @ MORTGAGEBLOC
4 年Absolutely Danny. Good points. Lenders also have obligations to pay their investors.