FSA Kills-off Self-Cert and Fast-Track, 28/07/2010

The Financial Services Authority has released its consultation paper on responsible lending today, which puts an end to self-cert and fast-track mortgages by requiring lenders to verify borrowers' income in all cases.

It says the lender must have evidence that the declared income figure is accurate.

In its paper it says: "Although lenders will be responsible for verifying income and assessing affordability, consumers will be more actively engaged with the mortgage process by providing evidence of their income to demonstrate they can afford the mortgage"

But it says to give lenders the flexibility to be innovative and meet the needs of different market segments, it does not propose to be prescriptive about the means of evidencing income, such as paper-based or electronic based.

The evidence must come from a source independent of the applicant, but this can come from an applicant's employer, bank, accountant or HMRC.
It also says in relation to variable sources of income it expects lenders to consider the variability of income over time, which may influence the period over which income is verified.

It also expects lenders to use human intervention when verifying income.

It recognises that most fast-track lending is good quality, with poorer quality loans generally being channelled through the self-cert. However it says the absence of self-cert is likely to heighten pressure to accommodate consumers who are unable to prove income through alternative routes.