The FSA says fast-track mortgages would just become “self-cert by another name” if the regulator decided to allow lenders to offer a fast-track service.
Speaking at the Building Societies Association annual mortgage seminar this week FSA mortgage policy manager Lynda Blackwell said that self-cert mortgages have been largely withdrawn from the market in the wake of the credit crunch.
Blackwell said: “So what’s wrong with fast-track? We are well aware that lenders’ fast-tracking processes can be ‘gamed’ by brokers who know the rules and who know where to place cases where they don’t want to provide evidence of income.
“And with the demise of self-cert, the point of least resistance becomes fast-track. Fast track would simply develop into self-cert by another name. We read the mortgage blogs and have seen many brokers comment on how easy and open to abuse the fast track process is.”
The FSA has proposed to introduce income verification on all mortgages as part of its mortgage market review, effectively banning self-cert and fast track.
Blackwell says that 15 per cent of all mortgage applications in 2007 above 95 per cent loan-to-value were non-income verified. Blackwell says non-income verified mortgages continue in the form of fast-track, with fast-track accounting for 43 per cent of all mortgages sold in Q1 this year.
She adds: “If we leave fast tracking as it is, there will be a natural relaxation of criteria, as we saw in the past.
“As we have seen, memories are short, particularly when the good times start to roll. And we are not just concerned about the near future: we are concerned about putting in place standards that will endure across the economic cycle.”
Blackwell also criticised the Council of Mortgage Lenders for its claim that had the MMR proposals been in place between 2005 and 2009 around half of the mortgages advanced would not potentially not have been granted.
She said the trade body was “premature” to make such judgements before the rules had been finalised.