Lie-to-Buy Mortgage Brokers & the FSA.

loveandlight

posted by Conrad
The army Accoutants that ensure most self employed people pay far less Tax than they really ought to

*sigh* How I wish this were true. Every single accountant I have used so far has either cost me money in penalty fees to the government due to their own delays or overcharged in their billing. It's cheaper to go on an accounting course and D-I-Y.

carolt

As someone who's only worked on short-term contracts or been self-employed since my kids were born, in some ways I have sympathy with Conrad's view - until a couple of years ago, mortgage payments for us would have been the same as or less than the rent, on an equivalent property, but we didn't qualify for any standard mortgages based on traditional income multiples, despite never having missed a rental payment or been late once.

On the other hand, I think the growth in self-cert or lie-to-buy has been one of the big drivers of outrageous house prices in recent years, and so the removal of it (in its worst forms) has to be a good step in returning the market to sanity. Maybe it will mean some poorer or indeed working class people can't buy now - but that is probably in their own interest, as prices are set to crash.

We were certainly encouraged to lie by a broker (we didn't) and I know too many anecdotal stories of people who lied big time to buy an overpriced rabbit hutch, and are now (thank goodness) going to get their fingers burnt.

The sooner we return to low prices based on low multiples, the better (except for fools/gamblers/the dishonest).

treliac

The employment market has changed radically in recent years. So what's the answer for people who rely on a succession of short-term contracts. Will they not be able to get mortgages? It would exclude a lot of perfectly solvent individuals.

On the other hand mortgage fraud and mis-selling appears to be on a mind-boggling and phenomenal scale.

Looks like we've descended into one big mess in the world of mortgages. Who's going to pay for it all? The 'ordinary man in the street', as usual, I suppose.

carolt

Excellent point, treliac. Don't know what the solution is.

What do the brokers think?

herbiesjp

treliac wrote: »

The employment market has changed radically in recent years. So what's the answer for people who rely on a succession of short-term contracts. Will they not be able to get mortgages? .

I have not read the whole post

I am just responding to this point.

You are indeed correct that the employment market has changed dramatically over the years.

Mortgage lenders already accept this fact

You do not need a self cert mortgage, if you are on short term contracts , that have been renewed. You should be looking at full status mortgages, as your income is verifiable. Plenty lenders would look at this with no problem at all

FraudBuster

5th August 2008.

Quality of advice processes.

Key messages

• the overall findings in this sample are disappointing considering this is our second review of the quality of firms' mortgage advice processes
• many areas identified during our first review remain a concern as firms have not made sufficient progress in key areas

http://www.fsa.gov.uk/Pages/Doing/small_firms/mortgage/practice/advice/index.shtml

Dan_Collins_2

More like what the client wants to do is dodgy or stupid and the broker needs to earn a living!

FraudBuster

FSA/PN/090/2008
11 August 2008
The Financial Services Authority (FSA) has banned a mortgage broker and fined him £100,000 for submitting false mortgage applications.

http://www.fsa.gov.uk/pages/Library/Communication/PR/2008/090.shtml

toonfish

you don't seem to be busting much fraud, more like a "copyandpastefromthefsawebsitebuster"

Conrad

Blimey, almost every broker I've ever met over states thier own income when getting a mortgage! The point being of course that accounts are not a true reflection of income, for example if a Directors loan is established (a notional non tangible loan from the director to the company, say when the company was set up to purchase his pre existing sole trader business), then this has a significant effect on reducing income, yet the income is in reality exactly the same.

It seems it perfectly ok for Bono to exploit every tax loop hole under the sun and for ministers to cash in the equity on thier second homes which were funded by the tax payer, but its not ok for a broker to apply an income that is not reflected in thier business accounts.