We are living in a time where everything seems to be getting that bit more complex.
Cash and even cards are being replaced by QR codes in some retail establishments. I understand less and less of my kid’s homework, and I recently bought what I thought was a radio, which turned out to be a speaker requiring connections to a multitude of apps — taking me hours, rather than minutes, to get my head around. But maybe that’s just me.
When it comes to the wonderful world of mortgages, we are hearing from a growing number of intermediary partners who are experiencing a rising tide of cases, which are also deemed as being increasingly complex — for example, multiple sources of income or low credit scores in the owner-occupied space, and from a BTL perspective, limited company borrowing, specialist property purchasing/remortgaging, or expats looking to add to their BTL portfolios.
Rate will always be important for borrowers however complex their situations may be, but such cases do rely heavily on criteria and underwriting approaches — which inevitably differ from lender to lender across both the more vanilla and specialist areas of the sector.
Systems and platforms are now widely available to help advisers from a criteria sourcing standpoint, but when it comes to individual underwriting approaches, there are still plenty of grey areas for brokers to navigate.
As a lender, over the past 12-18 months, we have taken steps to transform our underwriting approach by putting new systems and processes in place which enable us to say ‘yes’ to more cases as opposed to the old ‘computer says no’ attitude.
This doesn’t mean that we have significantly shifted our lending position to incorporate this. We have simply removed some prohibitive barriers and armed our underwriting team with greater autonomy — all while maintaining robust and responsible lending boundaries.
On that note, I recently asked the underwriting team to outline one simple component within our BTL criteria, which has helped them to deliver more positive outcomes.The most common response was around limited company deposits — more specifically for those clients building a BTL portfolio to sit within a Special Purpose Vehicle (SPV).
Many deposit options are available for such a transaction. Landlords can opt to use their own personal funds and pay them into the SPV via a director’s loan, shareholder funds or a combination of both. They may also wish to use funds from another company they are party to. This could be via a company loan in common ownership, whereby the funds are paid directly to the SPV or its parent company. This would be classed as an intercompany loan whereby the funds are transferred within that group of companies.
Our approach allows us to condition an offer depending on how these funds are being generated and to alert the solicitors accordingly — they should then know exactly how to treat each scenario thanks to the Mortgage Lenders Handbook for conveyancers, which details our legal requirements for them. This is just one example of a joined-up criteria and a manual underwriting approach.
If the volume of limited company business being written continues its sharp upward growth trajectory, it will be more important than ever for intermediaries to work with specialist lenders with underwriting teams that have the ability and appetite to say ‘yes’ in 2023 and beyond.
