Self-cert definitions under fire

Ramesh Sharma

February 18, 2006

Lenders have been criticised for asking for different information regarding self-employed definitions and verifications of self-employed status with some requesting a full breakdown of income while others require only total personal income.

Alan Lakey, senior partner at Highclere Financial Services, argued many lenders’ self-cert definitions were too specific and didn’t allow for certain income streams. He said: “Any lender that purports to offer a self-cert facility and then specifically requests details of ‘net profits’ is causing problems because if the client supplies any figure different to their provable net profit they are setting themselves up for accusations of fraud. How will the FSA view applications where affordability cannot be confirmed because the client has told the adviser they ‘earn’ £20,000 but their net profit figure stands at £8,000?”

Lakey went on to praise Bristol & West and Freedom Lending for their approach to self-cert lending, asking only for the total personal income of the client and urged more lenders to follow the app-roach set by the two providers: “If lenders are serious about self-cert they should use a generic question such as, ‘What is your total income? Please sign here to confirm this figure and that you have assessed the mortgage repayments are within your capability’,” he argued.

However Vicki O’Connell, public relations manager at Chelsea Building Society, said lenders needed to be specific with self-cert mortgages for the self-employed. “We allow clients to give their net profits or their total income and then this is checked with their accountant to see how long they have been trading and just to confirm they are who they say they are,” she stated.

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