News in depth

GMAC-RFC issues manual affordability warning

17 March 2007

Speaking at an event by the Social Market Foundation, Stephen Knight, executive chairman of GMAC-RFC, admitted that lenders needed greater knowledge on affordability checks. He said: “Lenders have a duty to treat their customers fairly but many simply do not understand the impact antiquated underwriting systems have

on arrears.”

Knight added that automated underwriting could help lenders to determine borrowers’ ability to pay debts.

He urged the industry to do more to educate lenders on how to improve systems. He added: “Lenders will always benefit from hearing how their products, policies and actions impact upon the lives of consumers. This can only be achieved through constant communication with MPs, consumer groups and others exposed to the industry.”

Alex Hammond, PR manager at Kensington Mortgages, commented: “To say manual checks leave people at risk is not looking at the whole of the market. Perhaps for prime or near-prime borrowers automated systems can work better, but as you go down the scale and are looking at borrowers with more serious adverse credit, it is harder to automate their affordability.

“You cannot put these people into a box as lots of different factors will influence their ability to pay. Lenders need underwriters to assess these customers individually.”