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A question of standards

Following the announcement of Kensington Mortgages additional budget planning form, brokers discuss a move towards an industry-standard expenditure document.

Ahead of the mortgage market review in April, Kensington Mortgages told brokers last week it was introducing a new household expenditure form for borrowers.

Kensington’s application process now includes an additional data requirements form and a household monthly living expenditure form.

The expenditure form breaks household budgets into seven categories – the section on car travel alone requires details on insurance, fuel and parking costs.

Brokers have been shocked by the “forensic” level of detail required, saying the requirements are nothing short of “incredible”.

Kensington says the household expenditure form will be used at an underwriter’s discretion to support an application where there are outstanding questions about the applicant’s affordability. 

Kensington was the first lender to update its application process ahead of the MMR. Other lenders have sought to reassure brokers they are not planning to overhaul their application process to the same extent.

Cambridge Building Society mortgage and intermediary sales manager Tracy Simpson says: “There will be minimal changes made by The Cambridge as we have had robust affordability criteria for several years now and already stress-test mortgage payments in line with the MMR guidelines.

“The Cambridge has been using affordability models instead of income multiples for several years and has always offered a fully advised process so the MMR guidelines have not come as a surprise.”

Leeds Building Society general manager for business development Martin Richardson says: “We have been working on implementing appropriate changes to be ready for the implementation of the MMR since it was announced, and have already implemented most of the changes necessary, including the way we assess affordability.

“Whilst there may be some minor changes to policy and the application process, we believe these will be small in nature. We will be ready for the MMR in April.”

A Santander for Intermediaries spokeswoman says: “In the run-up to the MMR, we will be working closely with intermediaries to ensure they have the information and support they need for a smooth transition in to the new world.

“SFI already offers an affordability calculator on its website allowing intermediaries to understand full affordability based on customers’ expenditure and incomes. At this time, we currently have no plans to change the level of detail required for our application process.”

A spokeswoman from Coventry Building Society says: “Like all lenders, we are preparing for the MMR and we are on track for the 26 April deadline.”

Brokers have suggested a more uniform approach is needed to assessing affordability and spending.

Your Mortgage Decisions director Dominik Lipnicki says the MMR reforms are aimed at trying to make lenders more responsible for the money they lend, and that greater scrutiny is being passed down to consumers and brokers.

Lipnicki says: “On the one side, we must do all we can to ensure consumers are safe and that the industry remains clean; we would just appreciate it if it was all done in a more uniform way.

“Instead of Kensington having one form, and another lender having something else, if lenders just got together and agreed a standard expenditure form, they can apply their own criteria to a standard set of data.”

Lipnicki says if a standard expenditure form was in place, brokers could receive training on what information they need to collect from borrowers as part of their mortgage qualification. He believes this would help create a simpler process ahead of borrowers submitting an application.

John Charcol senior technical manager Ray Boulger says: “The level of detail included in the Kensington document just seems excessive. It may be tricky to put in place but a more uniform process for something like budget planning, regardless of the criteria lenders choose to apply, could make the application more efficient for brokers as well as consumers.”

Coreco director Andrew Montlake says: “Budget planning has always been an integral part of how brokers work and a standard form would certainly make sense, primarily because borrowers will know what to expect across the board. 

“Lenders have their own nuances but in essence, analysing someone’s budget should be a straightforward process. I would certainly support the introduction of a standard expenditure form.”

But some brokers feel this may be a step too far for lenders.

London & Country associate communications director David Hollingworth says: “I can definitely see the logic and thinking behind the idea – it just seems difficult to see lenders all coming together on something like this.”

Trinity Financial product and communications manager Aaron Strutt agrees. He says: “It is always going to be hard to get the industry to come together on something like this – especially when you consider that different lenders will take different approaches to meeting the MMR requirements.

“The bigger institutions will have their own systems in place, while some smaller lenders will take a more personal approach to underwriting so they look for different information.”

The Council of Mortgage Lenders says it is open to the idea of creating a standard expenditure form, but only after the MMR reforms have bedded in.

A spokesman for the CML says: “In time, this is something that could be brought up with our members. At the moment, lenders are all preparing for the MMR and the focus will remain on that for the coming months.

“But once the dust has settled and lenders are accustomed to the new regulations, it is possible a move to a standard expenditure form will be brought up in discussions.”


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