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Is fast track proving its worth?

Paul Thomas reports that a mortgage performance survey has encouraged fast-track supporters

Fitch Ratings’ report revealing that fast-track mortgages are performing in line with, and in some cases better than, income-verified prime loans has lent weight to the argument that the FSA is wrong to ban the products under its mortgage market review.

In the MMR, the FSA proposes that income should be verified for all mortgage applications, meaning applications could not be fast-tracked
without this proof. Several big lenders, including Halifax, Northern Rock, Woolwich, Abbey and Nationwide, still offer fasttrack options and there is strong support for the FSA to allow this to continue.

First Action Finance head of communications Jonathan Cornell says he is pleased with Fitch’s findings and says the FSA should differentiate
between self-certification and fast-track mortgages.

He says: “I think the FSA needs to establish the difference between selfcerts and fast-track. I am not surprised by the figures but I was pleased
to see an outside agency without an invested interest such as Fitch come out and confirmed what we believed to be true.”

He adds that lenders would not offer fast-track mortgages if they were concerned about people using them fraudulently. He says: “If the lenders were nervous about people committing fraud, they would not offer them but I think the lenders are happy to retain it.”

Mortgageforce managing director Kevin Duffy also believes there has been a blurring of the lines between self-cert and fast-track mortgages and
says the fast-track label might be reinvented in the coming months.

He says: “The behaviour around self-cert and fasttrack is a little bit like the Dangerous Dogs Act. What has happened here is that the authorities have outlawed pitbull terriers and are now looking to outlaw German shepherds, who have a perfectly acceptable place in society and yet who are now finding themselves muzzled.

’Fast-track represents a well structured product in terms of credit risk management. Let the lender do what they are meant to do’

“Fast-track is a label, like self-cert is a label, and what you might find in the coming months is that they simply create a new title for it and it becomes something else – highequity lending.”

Cornell says banning fast-track mortgages has implications for the price of mortgages, with the borrower losing out. He says: “If you have to send proof of income with everything, it will slow the process down and I think mortgages will cost more. Ultimately, that additional cost will be passed on to borrowers.”

Duffy says a ban could hinder economic recovery. He says: “I think this has the potential to frustrate what, of late, have been promising signs of recov – ery. It has the potential to destabilise the recovery that is under way.”

Email Mortgages chief executive officer Michael White says: “I welcome this report from Fitch. It makes sense. Fast-track represents a well structured product in terms of credit risk management. Let the lender do what they are meant to do.”

He also believes the FSA would be going too far in banning fast-track loans.

He says: “I have a lot of time and respect for what the FSA do but, unfortunately, at present, the FSA’s policing strategy is amputation as opposed to cure.”

Cornell says the findings could help the situation and the FSA might listen to Fitch when it considers responses to the MMR.

He says: “I am sure the FSA will listen to the response to the MMR from brokers, lenders and outside agencies, who agree that fast-track should not be scrapped. They are not stupid at the FSA and things like this can only help.

But Association of Mortgage Intermediaries director Robert Sinclair does not believe the FSA’s proposals amount to a ban on fast-track.

He says: “I think they would argue they are not banning fast-track, what they are saying is they want to see income verification in all cases.

“Because fast-track is a system where the consumer has been, effectively, credit-scored and deemed to be low-risk, I would always argue that
system would give you a better view than intervention-checking.”

Sinclair says that when fast-track is properly applied it requires a broker to verify income and the lender can ask to see it, so checks are already in place.

He says: “Do I think we should keep a process for fast-track? I think we should. I think we are already there to a degree, in that the broker has
to have evidence and the lender can call for it.

“If the FSA is saying the lender must always see evidence of the income and not trust the broker then that is an interesting argument. Most lenders at the moment are happy with the position.”

Oakhurst Financial Planning managing director Frazer Horton believes fast track might as well be banned already because he believes that he is expected provide income verification for every transaction.

He says: “From my point of view, as a broker, they are banned. I am very conscious that for every single fast-track mortgage I put through I actually have to have evidence.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Gregory Spiller 12th March 2010 at 7:28 pm

    There is no issue with fast track lending for mortgage providers, because they have subtantial security with low loan to values and will never loose money themselves, so no future crisis to worry about for the lenders i.e. the taxpayer in many cases. This should be let be as a business decision to encourage the interest rate competion between lenders. The applicant is highly unlikely to default on thier mortgage and allow a repossetion by a lender, because they have to much to lose themseves. THIS IS A NO BRAINER ENCORAGE AND SUPPORT IS REQUIRED BY THE FSA FOR A CHANGE MORE LENDERS NEED TO OFFER THIS!

  2. Fast track is just self cert by another name.

  3. Jannie Vermeulen 16th March 2010 at 9:48 am

    For those who have limited experience in Credit Risk Management Fast Track might seem risky. For those in the know it is one of the most powerful tools to mitigate your risk. Obviously the comments above are from people who know what they are talking about.

  4. well many of the local high street branch mortgage sellers who are heavily targeted are doing mortgages for self employed customers I see who cannot provide sufficient proof of income or whose accounts do not show sufficient income to service a mortgage- no audit checks on bank mortgage sellers but we brokers are looked upon as criminals by the muppets in Con “a broker” Wharf

  5. Fast track, just as self cert was, is the banks way of ‘turning a blind eye’. If a client has high enough credit score and low enough LTV, they couldn’t give a monkeys if the client doesn’t meet their minimum income requirements. Instead they place the onus on the mortgage broker to decide whether he should put his career on the line (and his liberty) by fudging the figures to fit the lender’s requirements. Unfortunately for the broker it is an FSA requirement that he DOES obtain proof of income from the client so to proceed with a dodgy transaction is playing with fire that a network or FSA inspection visit may dig out that file to see that income evidence hasn’t been obtained or has been exaggerated. As inspection visits don’t happen very often and when they do only a few files are spot checked, this means the brokers that are prepared to take the gamble stand a very good chance of not getting caught. The 90% of mortgage brokers who do follow the rules would welcome the banning of fast track as this would eliminate the pressure from employers, estate agents and new build companys to do a dodgy deal to get a sale through.

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