Getting foreign national buy-to-let paperwork right from the start

There’s nothing particularly enjoyable about telling a broker that the document their client has spent the past fortnight obtaining from overseas isn’t quite what the underwriter was expecting.

And while that might sound like a relatively minor administrative problem, it can become a big headache when the information has to come from a bank or government department thousands of miles away.

The good news is that this type of scenario can be avoided with some preparation. It comes down to being familiar with the different ways financial information is recorded overseas and recognising where an application might need a little more attention.

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Know what you’re asking for

Overseas financial documentation doesn’t always look like the information we’re accustomed to receiving in the UK. Banking arrangements and tax reporting conventions vary between countries, and even relatively familiar documents may be issued in formats an underwriter hasn’t encountered before.

If you’re asking for evidence of income, you need to know which documents can reliably establish it in the country concerned. It’s all very well offering mortgages to overseas borrowers, but I think lenders have a responsibility to develop that knowledge if they’re actively looking to support this part of the market.

Of course, there are regulatory requirements that cannot be negotiated, and nobody should be suggesting otherwise. But equally, specialist underwriting involves recognising when the information provided is sufficient to satisfy those obligations, even if it arrives in a less familiar format.

Follow the money

Source of funds is a good example of where an application can become more involved than the initial enquiry might suggest. A borrower may have accumulated their deposit through the sale of an overseas property or the proceeds of a business, and establishing where that money originated can require a fair amount of investigation.

Where funds have moved between accounts, the lender may need to establish a clear audit trail from the original transaction through to the account being used for the deposit. That might involve tracing payments through several financial institutions, particularly where money has been transferred between countries.

And there’s nothing unreasonable about asking for that evidence, particularly given the obligations lenders have around financial crime prevention. The frustration comes when a broker discovers halfway through the process that the borrower needs to obtain records relating to a transaction completed several years earlier.

The earlier those discussions happen, the better. A broker who knows the likely source-of-funds questions can establish whether the borrower has access to the relevant records and flag any potential difficulties before they affect the transaction.

Overseas paperwork doesn’t arrive on demand

It’s also worth remembering that obtaining documentation from another country isn’t always as straightforward as downloading a statement from an online banking app. Some institutions have their own procedures for releasing records, and there may be additional requirements around certification or translation.

Time zones can make communication more difficult, particularly when a broker is trying to resolve a query with somebody who isn’t available during the UK working day. None of this necessarily prevents a mortgage from proceeding, but it does need to be reflected in the timescales being discussed with the client.

Lenders will never be able to anticipate every eventuality, and there will always be cases where something unexpected emerges during underwriting. The important thing then is to explain the issue properly rather than simply sending another request for paperwork without any context.

The lender has to take responsibility

I don’t think it’s reasonable to expect brokers to be familiar with the financial systems of every jurisdiction their clients might come from. They already have an enormous amount of lender criteria to keep on top of, and there’s a limit to how much specialist knowledge anybody can reasonably be expected to carry around.

That doesn’t take away from the important role brokers play in preparing an application, of course. We see plenty of well-prepared cases where the broker has clearly spent time getting to know the client’s circumstances, and lenders should be making that work count rather than creating additional difficulties further down the line.

At Molo, we’ve developed our foreign national proposition with people available to discuss cases where the circumstances need further explanation. A broker should be able to benefit from an efficient application process without losing the opportunity to speak to somebody who understands the underwriting requirements.

That ability to have a proper discussion is particularly valuable in this market. There’s a considerable difference between explaining why a particular piece of evidence is necessary and leaving somebody to work their way through a series of requests without knowing what the lender is trying to establish.

If we’re going to offer foreign national mortgages, we need to be properly equipped to deal with the practicalities of lending across borders. Getting the paperwork right isn’t particularly glamorous, but I suspect most brokers would happily settle for fewer surprises and an application that progresses as expected.