Investigations to establish the source of an applicant’s funds to purchase a property or clear a mortgage balance topped the agenda at this month’s Conveyancying Association meeting as members came together to establish best practice.
Goldsmith said: “Brokers need to understand how a conveyancer thinks and works. We are not there to be gate keepers. We are trying to weed out anything which doesn’t feel right.
“For example if an applicant is remortgaging his property and his home is unencumbered then we will want to know how the applicant has managed to pay off the mortgage.”
Supporting documents are not needed in all circumstances.
If the property has been inherited then the solicitor will ask to see a copy of the will as proof. But if the mortgage balance has been paid off and the property was bought twenty years ago this explanation should be enough to stand alone.
The overriding consensus among the members was that queries for applicants about the source of funds should be raised early in the application process to avoid delaying the completion of the transaction.
“We we need are logical explanations,” he said. “If an applicant is 18-years old and owns an unencumbered property then this will raise eyebrows. What we require is independent, corroborative evidence.”
Goldsmith said experienced brokers will know they need to understand the story behind how the applicant acquired the property and will use common sense when deciding the supporting documents to submit to the lender.
But Goldsmith said consistency among conveyancers is a problem.
He said: “Some conveyancers ask for a lot of detail and supporting documents while others may ask for just an explanation. That is a problem and that is why the regional meetings are so important because it gives conveyancers the opportunity to discuss their practices among their peers and see if they are doing too much or too little.”