My budget wish - less FSA regulation

Conrad

ILW wrote: »

I canjnot see your point about declared income and true income being very different, can you give an example which does not involve either tax evasion or mortgage fraud?

Keep in mind self cert is but one client category to be affected by regulation, but ok, lets take me as an example;

I own a Ltd co.
It used to be a sole trader.
I 'sold' the ST to my new Ltc co.
The sale was valued at £xxxxxx, and the revenue agreed with the valution.
The 'sale' created a Directors loan account of £xxxxxx.
This then shows up as an expense of the Ltd co and is duly used to offsett against turnover BUT HAS NO BARING ON MY TRUE TAKE HOME PAY.

Also I use a room at home for paperwork - this also shows up as an expense even though I'd have this same cost as an employee - I'd still own the room come what may.

These are just 2 small examples of why REAL income bares no resemblance to DECLARED INCOME.

We could of course ask all business owners to up thier declared income and pay more Tax, if they want a mortgage, but this would be a huge adjustment that would lead to increasing costs and staff layoffs.

Cases like this demonstrate the legitimate non fraudulent case for self cert, and again the vast majority DO NOT GET REPOSSESSED.

Conrad

Generali wrote: »

A 65 y/o could get a low LTV mortgage for a short period if the plan was to sell the house to clear the mortgage in
You can include things like bonuses and commission as income but you have to prove that you get them pretty consistently
Basically they look to the borrower to put together a story that stands up to some scrutiny with evidence.
.

That is pretty much what we need here, but the 6 core FSA principles known as TCF (Treating Customers Fairly) place too much onus on the lender to prove beyond a doubt the lending is sound.

So your 65yo in the UK would now be declined in most instances.

This crushes thier individual autonomy to make sensible decisions. Nanny tapping them on the shoulder with a knowing patronising tsk tsk.
In the past, 99% of older applicants did not get repo'd, but the current rules cause a gross distortion where these and many other applicant classes are now excluded from the market.

At the mo the bears here applaud all this, but one day they or someone they know will come up against this madness.

Why on Earth shoud a compus mentus 60yo be treated like a child?
In the past I have helped such people and none of them got into trouble - they knew what they were doing. Often they were newly divorced but planned to carry on working, expected an inheritance, met a new partner who had resource etc etc. WORSE CASE > THEY CAN SELL THE HOME!

The point being, grown adults in the main know what they are doing.

FSA regulation removes thier independance and severely curtails economic activity from the ground up. If people feel miserable as they are forced to rent (I'E it is not thier decision - they have no sayso), this does much harm to sentiment.

shortchanged_2

Conrad wrote: »

Keep in mind self cert is but one client category to be affected by regulation, but ok, lets take me as an example;

I own a Ltd co.
It used to be a sole trader.
I 'sold' the ST to my new Ltc co.
The sale was valued at £xxxxxx, and the revenue agreed with the valution.
The 'sale' created a Directors loan account of £xxxxxx.
This then shows up as an expense of the Ltd co and is duly used to offsett against turnover BUT HAS NO BARING ON MY TRUE TAKE HOME PAY.

Also I use a room at home for paperwork - this also shows up as an expense even though I'd have this same cost as an employee - I'd still own the room come what may.

These are just 2 small examples of why REAL income bares no resemblance to DECLARED INCOME.

We could of course ask all business owners to up thier declared income and pay more Tax, if they want a mortgage, but this would be a huge adjustment that would lead to increasing costs and staff layoffs.

Cases like this demonstrate the legitimate non fraudulent case for self cert, and again the vast majority DO NOT GET REPOSSESSED.

Is this what certain self employed people call 'creative accounting'?

Generali

Conrad wrote: »

Keep in mind self cert is but one client category to be affected by regulation, but ok, lets take me as an example;

I own a Ltd co.
It used to be a sole trader.
I 'sold' the ST to my new Ltc co.
The sale was valued at £xxxxxx, and the revenue agreed with the valution.
The 'sale' created a Directors loan account of £xxxxxx.
This then shows up as an expense of the Ltd co and is duly used to offsett against turnover BUT HAS NO BARING ON MY TRUE TAKE HOME PAY.

Also I use a room at home for paperwork - this also shows up as an expense even though I'd have this same cost as an employee - I'd still own the room come what may.

These are just 2 small examples of why REAL income bares no resemblance to DECLARED INCOME.

We could of course ask all business owners to up thier declared income and pay more Tax, if they want a mortgage, but this would be a huge adjustment that would lead to increasing costs and staff layoffs.

Cases like this demonstrate the legitimate non fraudulent case for self cert, and again the vast majority DO NOT GET REPOSSESSED.

But then again it should be perfectly possible for banks to build products that take all this into account while using properly documented evidence of the amount of money a person is taking out of a business in income, expenses (eg home office) and dividends.

If banks know that by giving self-cert mortgages they are opening themselves up to fraud, they can't continue to grant those sorts of mortgages. It doesn't even really have anything to do with the FSA, it's just how banking works.

Conrad

DervProf wrote: »

These millions of hard working brits will still get their homes, they'll just have to save up a bit longer before they buy one. And when they do buy one, they won't need such a large mortgage.

I'm afraid many cannot save and pay rent. Maybe you as a disciplined person can, but many cannot.
Think of a licensed London cabby, real take home pay £1200 per week, declared profit £18 - 25k pa. Lets say his family need a 3 bed home costing a minimum of £200k in a fairly poor area. On £25k with no other debts he'd need to save £100k.

Point is, if we carry on like this, it will be doubly hard to get out of the mire.

Give people a realistic chance of attaining thier home owning goal, and overnight a momentum returns, thier spirits lift, and from the ground up a major impetus is introduced.

Also don't forget I am not just concerned with self employed people. There are dozens of categories that fail the lending tests, from agency nurses to people with 2 jobs (TCF rules would usualy lead to a decline of such an application).

Conrad

Generali wrote: »

But then again it should be perfectly possible for banks to build products that take all this into account while using properly documented evidence of the amount of money a person is taking out of a business in income, expenses (eg home office) and dividends.

If banks know that by giving self-cert mortgages they are opening themselves up to fraud, they can't continue to grant those sorts of mortgages. It doesn't even really have anything to do with the FSA, it's just how banking works.

As I said many self cert products allowed the applicant to merely confirm affordability with no income level stated, ergo, no or little fraud involved.
All in all the market was ordered and 99% of owners kept thier homes.

New tougher FSA rules mean millions are now barred, this is the point. Again self cert is only one category now disadvantaged.

I simply do not agree with this limit on aspiration - a new glass ceiling where only middle class employed people can access home ownership. Its a brake on sentiment.

Generali

Conrad wrote: »

As I said many self cert products allowed the applicant to merely confirm affordability with no income level stated, ergo, no or little fraud involved.
All in all the market was ordered and 99% of owners kept thier homes.

New tougher FSA rules mean millions are now barred, this is the point. Again self cert is only one category now disadvantaged.

I simply do not agree with this limit on aspiration - a new glass ceiling where only middle class employed people can access home ownership. Its a brake on sentiment.

Banks are innovative organisations and they will find ways to lend to people who are not 30-something 9-5ers wanting a 3 bed semi in Orpington when they have the funds that they want to lend.

At present there is no great desire on their part to take on further risk so there is no reason for them to come up with new products. They will in time.

ILW

Conrad wrote: »

As I said many self cert products allowed the applicant to merely confirm affordability with no income level stated, ergo, no or little fraud involved.
All in all the market was ordered and 99% of owners kept thier homes.

New tougher FSA rules mean millions are now barred, this is the point. Again self cert is only one category now disadvantaged.

I simply do not agree with this limit on aspiration - a new glass ceiling where only middle class employed people can access home ownership. Its a brake on sentiment.

Maybe a glass ceiling where only those that pay enough tax to demonstrate affordability would be for the overall good.