A friend is going through a bad time financailly and has no net profits [he's self-employed]. He needs to remortgage to give him some leeway.
He's just seen a broker [recommended by his accountant] who has suggested he just declares that he earns £40,ooo or whatever to get the new mortgage.
Is this still considered to be an acceptable thing to do? A quick trawl of the net has revealed that loads of lenders are still offering self-cert mortgages, but surely it constitutes fraud?? The broker has told him that "everyone does it" Am I being naive in thinking that he could be in serious trouble if he does this?? Thanks
Oh my god, he is living dangerously! If his business continues to make zero net profit, and he runs out of the money he borrowed on the mortgage to pay the mortgage he will be well and truly stuffed!
The FSA has various rules for people to be licensed to sell regulated mortgages, which his re-mortgage would surely be classed as. One of those rules is about affordability. The broker/mortgae advisor must take steps to ensure the repayments are affordable. Clearly your friend cannot afford this loan.
He is desperate, so he will do as the broker says, he will lie on his application form. He cannot see another way out. He is hoping, praying for temporary relief. He is gambling on his business turning out a profit. But he is gambling with the roof over his head.
He should go to the Debt Counselling Service. He should come to an arrangement with his creditors. He should ask for leniency with his mortgage payments. His mortgage is the most important of all his debts. He should leave the unsecured borrowing as it is, unsecured. The worst that can happen with unsecured borrowing is nasty letters, a bad credit file, and possbly bailiffs. But if he agrees a payment plan with them first, he should get plenty of leeway. If he stuffs up on his mortgage payments, he could lose his home.
Tell him it is a gamble that could lose him more than the shirt off his back! Tell him to go seek help, and to stop burying his head in the sand.
It's a sad day since the Financial Institutions stopped insisting on 3 years books before they would lend. Little wonder this Country is sinking under the debt mountain. If your friend had any sense he would steer clear of borrowing even more money when clearly he can't afford to go any deeper into debt.
Originally posted by MELBOY: It's a sad day since the Financial Institutions stopped insisting on 3 years books before they would lend. Little wonder this Country is sinking under the debt mountain. If your friend had any sense he would steer clear of borrowing even more money when clearly he can't afford to go any deeper into debt.
A few months ago I was offered a store card. I work as full-time mum and slave and my 'wages' are @£110/month in child benefit. They also asked if my partner would like a joint card on my account.
Don't worry Karen - I believe you. DH and I have credit for nearly three times his annual take-home salary. We have absolutely no plans to use this "money", I just found it amusing a few years ago to apply for every single credit card whenever a flier came through my door or fell out of a magazine or newspaper. Strangely enough we got approved for all of them!
In their defence, I am grateful that we had the credit available to us a few years ago when DH had a motorbike accident and we had no income for three months.
I totally agree with you all that he should face up to the reality and sell his apartment, release the equity and be done with it. However you can lead a horse to water etc... Anyway, to go back to my original question is it legal to offer people mortgages that are clearly based on made up figures? And what are the penalties?
The BBC program on this matter a couple of years ago stated it was illegal to sign a document knowing it to be false declaration. Penalties? Don't know, but forced re-possession must come top of the list.
Peter Mandellson got into trouble over this, but I do not believe anything came of it.
I have seen mortgage offers pulled at the last minute when new information has come to light, one was pulled on the morning of completion! Nothing the buyer could do as they had lied on their mortgage application.
The loss to the buyer was a broken dream, a mortgage fee, a loss of fees for solicitors and search fees etc. And a warning on her credit file, CIFAS mortgage fraud and deception warning, which means she will not get a mortgae from anywhere else for a very long time!
The Advisor lost his job. He cannot work in the industry again, and faces possible prosecution.
"everybody does it" is a phrase these brokers use, but those that get caught pay a very hefty price.
I tought that was the case stateofplay, but it makes you wonder how Mandy got away with it- as ever, one rule for the rich and famous. Anyway, still trying to persuade my friend it's stupid. We'll see what happens.
Yes, it's illegal. People do do it. But that's no excuse to follow suit. It is illegal, and he could get into big trouble for it.
If your friend has no money to pay off a mortgage then he should not be taking one out. The forms where you have to demonstrate your ability to make the repayments are there for a reason.
No doubt you have already said all this to your friend.
Ary.
-------------------------------------- ***Do not, I repeat Do NOT feed the Trolls! *** *** All Hail the mighty hamsters! ***
We moved downmarket 3.1/2 years ago to (almost) clear our mortgage so I could start my own business.
In November, we'd been trading for 2.1/2 years, but doing well - made decent nett profit in year 2 and had cash in the bank.
I wondered if there was any chance of getting a mortgage so we could climb the ladder again and I was astonished at my appointment with the lender when, after she had said she didn't need to see any of the accounts/statements in my briefcase, she said "£200K would be no problem". Naturally, I upped our game immediately - found the biggest house in the best area we have ever lived, and when I timidly asked "any chance for £230K if you check my accounts?", again they said "no problem" and still didn't check a single document.
This was purely on my word and on the basis that "I had had mortgages off and on with them for years and never defaulted". OK, this is true, and we were putting 200K equity, but it's 4 x anything I've borrowed previously and I still find it staggering it was so easy.
------------------------------ 35% constitutes neither a majority nor a mandate
self certification is one of the major reasons for houses leaping up in price at a ridiculous rate, as they did a few years ago. Particularly in London, people could not possibly have afforded some of these prices without lying about their income. They're probably now living off their credit cards, waiting for their chickens to come home to roost.
Originally posted by TrevGo: This was purely on my word and on the basis that "I had had mortgages off and on with them for years and never defaulted". OK, this is true, and we were putting 200K equity, but it's 4 x anything I've borrowed previously and I still find it staggering it was so easy.
Wait for the Japan effect to filter through, they will soon tighten up lending!
Originally posted by TrevGo: We moved downmarket 3.1/2 years ago to (almost) clear our mortgage so I could start my own business.
In November, we'd been trading for 2.1/2 years, but doing well - made decent nett profit in year 2 and had cash in the bank.
I wondered if there was any chance of getting a mortgage so we could climb the ladder again and I was astonished at my appointment with the lender when, after she had said she didn't need to see any of the accounts/statements in my briefcase, she said "£200K would be no problem". Naturally, I upped our game immediately - found the biggest house in the best area we have ever lived, and when I timidly asked "any chance for £230K if you check my accounts?", again they said "no problem" and still didn't check a single document.
This was purely on my word and on the basis that "I had had mortgages off and on with them for years and never defaulted". OK, this is true, and we were putting 200K equity, but it's 4 x anything I've borrowed previously and I still find it staggering it was so easy.
To be fair, you have c.45% Equity, so if you default, they will get their money back. And, as you have a good credit history, why would you want to default.
All Hail the mighty hamsters! 
