In a previous column, I commented on the mindless rigidity displayed by many lenders when assessing mortgage applications. A process, which ought to be streamlined due to the experience and knowledge of the lenders, has been turned into an obstacle course worthy of the Royal Marines.
While it goes against the grain, I have to accept that lenders call the shots and they can create whatever labyrinthine procedures their process-driven mentalities can conjure. Much of this nonsense stems from the MMR which highlights yet again the consequences of theorists distorting the market with their notions and beliefs.
The latest and most pernicious example comes from Abbey for Intermediaries, a name as distanced from reality as Ivan the Compassionate and Attila the Samaritan.
On this occasion, Abbey issued a mortgage offer which some weeks later, without notifying either myself or the applicants, it summarily “pended”, which is its sugared term for suspended. All this without any comment or apology. Now, in my experience, having a mortgage offer suspended or rescinded is only ever due to fraud or some major misrepresentation by the applicant or introducer.
To its credit, Abbey accepted from the outset that neither I nor the applicants had committed any fraud or error of any sort. It fully accepted that the error was its alone – that it had made underwriting errors and had issued the offer with some information outstanding.
You might imagine that in such an instance it would accept its error, shrug it off and allow the clients to exchange contracts. Not so, apparently rules are rules and these must be obeyed to the letter. When told that the clients would like to sue, I was assured that Abbey would meet all costs of delay, running into thousands of pounds, rather than honour the original offer.
My clients were working to a fine timeline where they had to exchange and move during the holidays so that their children could be at their new school by the start of term. With this in mind, they were letting their existing property and remortgaging it which, with the encashment of their investments, allowed them to borrow from Abbey at 18 per cent LTV, hardly high-risk lending.
Abbey failed to cotton on to the fact that the borrowers were retaining their existing property – even though this was made clear within the application. As a result, it suspended the offer as it needed more information, some of which it had but failed to realise, with an emphasis on proof of deposit.
Various bank statements and investment encashments had already been sent but these did not equal the deposit required, no surprise as the encashments had yet to feed through to the bank account. Being continually told that Abbey is a responsible lender does not cut any ice with me or my clients and I questioned the need for proof of deposit. I suggested it think it through, that if at exchange stage the clients had been sufficiently imbecilic to have insufficient deposit, then the Abbey funds would not be drawn down, therefore, there would be no risk to it whatsoever. As we all know, logic plays no part in today’s mortgage underwriting process and my words were to no avail.
Abbey relented somewhat but continued to insist on proof of deposit and a screen dump was finally accepted. As I write this, the funds have been released and the exchange has taken place. A case of wine has been promised to the clients and I wait to see whether a bottle of brown ale, or maybe sangria, heads my way.
Alan Lakey is partner at Highclere Financial Services