Banning self certification mortgages would exclude borrowers that legitimately use the product from the mortgage market or end in them being trapped in their current mortgage, says the Council of Mortgage Lenders.
The CML created the comments as part of its submission to the Money Services Authority ahead of the publication of its Mortgage Market Review – expected next week.
But the CML says it considers self-cert a legitimate niche product for those that have irregular income or cannot verify their income from employment.
It says a ban on the merchandise would mean lenders would not be ready to fast-track cases for borrowers where income verification is simply not always undertaken, even when the applicant may give proof of income.
It will believe however there are sensible concerns for lenders to consider when verifying income, like how a lender may really verify income without access to a powerful knowledge set.
The modern issues stem not from a failure of the mortgage rulebook, or from widespread credit problems during a recession, but essentially from past approaches to supervision of the principles and an over-supply of cash to lend out. Currently the pendulum has swung and the difficulty is the lack of available mortgage finance. Regulatory intervention on mortgages is unlikely to reverse this trend plus can accentuate the problem