Tougher Mortgage Lending Criteria For Homebuyers Under New Reforms, Says Mis Sold Mortgage Company

    MANCHESTER, ENGLAND, February 02, 2012 /24-7PressRelease/ -- A recent report by the FSA sought to tackle the problem of people defaulting - whether through knowingly overextending themselves or being mis sold a mortgage - ahead of any new housing boom in the coming years. While the FSA has stated that "bad lending" has almost disappeared now, they admit this is due to lenders tightening up their criteria in the difficult economic conditions rather than homebuyers voluntarily seeking to rein in their borrowing habits.

As a result the FSA has suggested three new rules - due to take effect in 2013 - to update existing mortgage lending criteria.

The first new rule stipulates an affordability assessment will be required without exception to verify the income of those applying for a mortgage. This wasn't always the case during the housing boom. In addition to many lenders not bothering to check payslips properly, self-certification was frequently used as a loophole for many to allege a higher income than they had through claiming self-employment.

The second new rule was that fixed and variable essential household bills, such as council tax and child maintenance, must be taken into account. Again, this was often not the case during the boom years, with lenders preferring to work on standard 'averages' calculated by actuaries rather than according to an individual's actual expenses.

The third rule stipulates that the lender must consider how any future rises in interest rates could affect whether a borrower will be able to make their repayments, and possibly adjust the loan amount requested accordingly. All this ads to the mortgage mis selling process.

Lord Turner, Chairman of the FSA, said: "We believe that these are common sense proposals which serve the interests of both lenders and borrowers. While the excesses of the pre-crisis period have largely disappeared from the current market, it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.

"The three key proposals are, we believe, the most effective way to tackle the problem of risky lending. But it is essential that we understand what their impact would be - how many consumers would be protected from the distress of arrears and repossessions, and, how many consumers who could have afforded a mortgage might have to take out a smaller mortgage or to delay their purchase."

A spokesperson for Mis-Sold Mortgage Claims Company, Simple Financial Solutions, says: "For a while there was some worry over what the FSA would come up with. Among the options that caused some alarm were a total restriction on what an individual could borrow compared to earnings, tight limits on the amounts that could be lent to potential retirees, and a ban on interest-only mortgages. In the end, what has been decided is quite balanced and will help homebuyers buy their properties on a much firmer, secure financial footing."

However, the new rules are not without their critics, especially as the FSA has admitted that some people will almost definitely struggle to get a mortgage.

Grenville Turner, chief executive of Countrywide mortgage broker, said: "Where the proposals fall short, by the FSA's own admissions, is that 1 in 40 of new customers that would currently be eligible for a mortgage could potentially struggle to get a mortgage if the proposals were introduced in this market.

"In an environment where lenders are already being extremely cautious with their lending criteria; by placing all affordability assessments at the doors of lenders' risk teams this could create an even stricter lending environment."

Mortgage lenders now have three months to consult with the FSA over the new rules before steps are taken to put them into place in 2013.

Simple Financial Solutions provide help and adice for people who believe they have been mis sold their mortgage. If you have been the victim of mortgage mis selling we can reclaim thousands from your lenders. Call us now or visit our website for more information.

Website: http://www.writeoffloan.com

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