MCD could scupper selfcert.co.uk

Selfcert.co.uk may be forced to stop offering self-certification mortgages after 21 March when the Mortgage Credit Directive comes into force in all EU member states.

Selfcert.co.uk may be forced to stop offering self-certification mortgages after 21 March when the Mortgage Credit Directive comes into force in all EU member states.

The European Mortgage Federation has said in principle the MCD rules will force selfcert.co.uk to verify borrowers’ incomes – foiling the new lender’s plans to give borrowers a mortgage without assessing their affordability properly.

Jennifer Johnson, head of legaland economic affairs at theEuropean Mortgage Federation, said: “The MCD requires lenders to assess creditworthiness using information that is “appropriately verified, including through reference to independently verifiable documentation where necessary”

The European Banking Authority has recently introduced guidelines for national supervisors specifying that ‘the creditor should make reasonable enquiries and take reasonable steps to verify the consumer’s underlying income capacity, the consumer’s income history and any variability over time’.

“This indicates that self-cert is not permitted under the MCD,” added Johnson.

Earlier today the Financial Conduct Authority published a warning to consumers considering applying for a self-certification mortgage from any lender trying to circumvent European mortgage regulation.

A statement published on the regulator’s website this morning said: “Previously, when consumers took out a self-certified mortgage they self-certified that the income stated in their mortgage application was true.

“Because of the harm caused to consumers in the past, this is no longer permitted in the UK and firms must check a customer can afford a mortgage, including verifying their income in every case.

“From 21 March 2016, all firms offering mortgages in the UK (including EEA firms) will have to comply with the Mortgage Credit Directive, which requires a thorough affordability assessment based on information that has been verified by the lender.”

The UK regulator also warned borrowers determined to use self-cert.co.uk to ask for a copy of the mortgage terms and conditions; ask for the contact details of the firm’s regulator; find out how the firm will deal with borrowers who fall into arrears and get details of fees and charges.

Last week selfcert.co.uk was forced to close its doors to new applications for three months after a flood of enquiries in the lender’s first week overwhelmed staff and crashed its website.

The lender, which is based in the Czech Republic to allow it to circumvent Financial Conduct Authority rules that banned self-certification mortgages several years ago, said ‘a severe backlog’ of interest meant it couldn’t keep up with demand.

It launched on Monday last week and by Tuesday had seen 4,000 potential borrowers register interest.

The site said: “We have ceased taking new applications until further notice, this will be at least three months.

“We are currently working through a severe backlog of people that have registered an interest in these products.”

Selfcert.co.uk has yet to respond to a request for comment.