The audience member said that lender underwriting policies needed to be “dragged into the twenty-first century” in order to properly service the needs of self-employed customers.
An example was given of a self-employed barrister who had started maternity leave and as a result had received lower income that she would normally expect to earn. But as the lender calculated income based on the average of the last two years’ accounts the resulting income calculation was too low to secure the desired mortgage.
The fact that the barrister would return to normal income levels in the forthcoming year would not be taken into account.
However had the barrister been employed she would only be required to submit one month’s payslip and bank statement which would show full salary allowing the mortgage to be granted.
Richard Tugwell, director of intermediary relationships for Virgin Money, was keen to tackle the question and said that where there were obvious “ludicrous” sections of underwriting policy for self-employed customers this should be looked into.
He said: “We need to speak to intermediaries to find out which policies need clarification. We need to understand where the market is and I am keen to have dialogue with intermediaries to establish what the needs are.”
Charles Haresnape, managing director of Aldermore Mortgages, agreed that lenders needed to do more to review their self-employed policies.
Speaking in a later session, Lynda Blackwell of the Financial Services Authority conduct policy team, said the FSA had not included any rules in the Mortgage Market Review which specify what income verification is needed for self-employed applicants nor had it prohibited the use of forecasted income.
