Regulation not to blame for rigid underwriting
23 November 2016
Fluent for Advisers’ COO, Tim Wheeldon, believes that advisers should not accept when lenders tell them that regulation is responsible for the increasing numbers of mortgage cases that fall through at the underwriting stage and think that nothing can be done for those clients. Particularly when for capital raising cases, brokers ought to be considering a second charge option.
Fluent for Advisers is part of the UK’s largest second charge distributor, Fluent Money, and is taking many more enquiries from brokers who have found the first charge door closed.
He said, “While regulation has rightly made all lenders take stock of their underwriting procedures, it is wrong for first charge lenders to use the excuse that regulation is to blame for cases falling through.
Of course, there was always going to be a tightening of criteria and lending policy, but the more I hear that regulation is to blame, it seems to sound like the current trend for every problem to be placed at the door of the Brexit vote.
The truth is that regulation is all about interpretation rather than hard and fast rules. Unfortunately, many first charge lenders have conveniently decided that if they say ‘no’ more than they say ‘yes’, they are unlikely to fall foul of the regulator. The concept of having faith in the quality and experience of underwriters, their interpretation of lending policy and the regulatory framework has been substituted by many lenders with wholesale reliance on credit scoring, computer generated underwriting and general box ticking.
Thankfully, second charge lenders have demonstrated a more measured approach to regulatory requirements. While they have positively adjusted their underwriting and criteria, they have largely been prepared not to go down the computer driven path like their first charge cousins and stayed loyal to a more human approach of looking at cases in the round, rather than making them conform to a rigid template.
I would urge more advisers to be sceptical about those lenders which look to blame the regulatory structure to cover their own over cautious underwriting approach and compare it to the confident yet compliant alternative offered by the second charge sector.
