Brokers say Lloyds Banking Group is trying to “pass the buck” by conducting spot checks on random interest-only mortgage cases to check for evidence of an appropriate investment vehicle.
Lloyds said in May it would require proof of a person’s ability to repay the capital element of the mortgage and spot-checks of broker business will begin next week.
The sampling will be conducted after the offer stage. If the broker does not provide the documentation showing an appropriate vehicle is in place, Lloyds will contact the client directly. Brokers feel the move is a case of lenders trying to pass any blame on to the intermediary.
The Mortgage Practitioner principal Danny Lovey says: “All this should, in any case, be verified before the offer is made. If the lender has concerns, then they should check to see if an appropriate vehicle is in place. Brokers are not normally arranging the investment vehicle unless they happen to also to be an IFA.
“They are shifting the res-ponsibility to the broker, which is unfair because we have no control over this, nor can we know if they intend to continue paying into any repayment vehicle.
“This is a matter of buck-passing by the lender. Brokers can only do most in good faith and collect evidence when it is in existence.”
Abacus Financial director Matthew Fleming-Duffy says: “You almost feel vilified at the moment. It almost seems like a case of the soldiers being shot to spare the general. By doing these sort of checks, it does seem like they are trying to point the finger of blame at the intermediary. Historically, you would expect the lender to conduct their full audit checks.”
Oakhurst Financial Planning managing director Frazer Horton says the lender should check all cases and not just random samples but adds that lenders should not be expecting brokers to acquire the documentation.
He says: “The administration at some of these lenders at the moment is pretty poor. Either they check every case or they don’t. All they want to do is save money on administration. If the lender wants the document, they should obtain it themselves. I think the lenders are pushing responsibility to brokers so they can remove any blame themselves.”
A Lloyds spokeswoman says: “The lender, broker and borrower all benefit from having a clear understanding of how the mortgage will be repaid, and, given the relationship the broker has with the client, this seems like the most appropriate way to confirm that is the case. We are also happy to contact the client directly if the broker is not able to provide documentation when requested.”