Fast Track And Self Certification Loans To Go
We reported recently that the Financial Services Authority (FSA) was planning to introduce new regulations which banned certain types of loans and introduced rules for previously unregulated products such as secured loans.
The first discussion paper for the Mortgage Market Review (MMR) as it is known, outlined the initial proposals for the additional regulation of home owner loans and was published in October last year.
Yesterday (13th July) the FSA published its latest consultation paper on the MMR, which outlines the new proposed rules for home owner loans and mortgages, designed to offer a higher level of protection for potential borrowers and place more pressure on lending institutions to offer loans more responsibly.
The idea is to return to the principle of responsible lending on various types of loans and to stop problems with loans arrears, for example, before they occur.
The most significant proposals are that there will be a strict affordability test for a potential borrower before they are accepted for a loan and they must be able to provide proof of income to justify the loan. In other words there will be a complete ban on self certification loans and fast track loan applications.
There will also be an extra level of protection introduced for those borrowers with a poor credit history, who may have suffered with loan arrears or repossession of their home in the past.
Lesley Titcomb of the FSA said “There is a clear link between financial overstretch and mortgage arrears and repossessions and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford to pay it back.”
Although the proposals are designed to protect borrowers, some experts believe they could stop many perfectly credit worthy individuals from getting the loan they need and can easily afford. The consultation period ends in November this year.
