The Mortgage Process

To understand if you may have been mis-sold your mortgage it is important to gain an understanding of the mortgage application and sales process including the responsibilities that lay with both parties. These are the borrower and the mortgage adviser.

Any person/s making an application for a mortgage must provide accurate information to the adviser and ensure they disclose all relevant facts, pertaining to the ‘fact find’.

What process should a mortgage broker follow when advising on a sale?

The regulatory requirements are very specific; your broker must be qualified to give you advice. The first document that should be provided to you is an Initial Disclosure Document’ (IDD). This gives details about the brokerage and discloses what lenders they have access to for mortgage and other related products such as Payment Protection Insurances (PPI) or as it is sometimes referred to Accident, Sickness & Unemployment (ASU) cover, it also details all commission and/or fees they may charge and receive.

Often a broker will have software which ensures a strict compliance with the mortgage sale process, this software can also be integrated with ‘mortgage sourcing’ providers which help the adviser to select the best product available for you once your criteria has been captured in a ‘fact find’ document.

You should be offered a choice of mortgage products, these may have different product types and rates but could include, fixed rate terms, discounted rates, tracker rates. It should be made clear to you in the IDD if these products are selected from a restricted panel or are ‘whole of market’.

Once a product is selected, often the broker will seek to get a decision in principal or a binding decision from a lender. At this stage it should be made clear to you that a credit reference agency (CRA) check may be carried out. This is often referred to as a ‘credit search’. Your written consent for this check to be carried out is required. Once received you may be offered product cascading.

This is crucial as the CRA check may show you are eligible for a lower rate; single lender cascading is bad practice and would constitute a mis-sold mortgage.
The CRA search may also show you have adverse credit history and you may be declined or need a sub-prime product. When you have agreed a specific product, the broker must produce a Key Facts Illustration (KFI), this shows product details, the true cost of the mortgage over the term and all fees charged. (The lender will also produce a KFI later in the process).

The following is just a short list of important things that must be considered

Professional mortgage advisers need to take many more factors into account: -

• What is the purpose of your mortgage?
• What is your gross and net income?
• Do you receive bonus, commission or overtime payments?
• Is any additional income guaranteed or just regular?
• Can you prove all or most of your earnings?
• Do you have income from two or more sources?
• Does a significant amount of your income come from State Benefits e.g. Working Tax Credits, Child Tax Credits, etc?
• What deposit, if any do you have if you are purchasing a property?
• What are the purpose and the benefit of remortgaging?
• If remortgaging, what equity do you have in your property?
• Are there redemption penalties to be paid to the lender you are leaving?
• Do you have any adverse credit, such as:
• County Court Judgments (Decrees in Scotland)
• Credit defaults
• Bankruptcy
• Individual Voluntary Arrangement (IVA)
• Previously been repossessed
• Does your mortgage extend beyond retirement age with regular income available to make the monthly payments?
• Do you have sufficient sustainable income for the whole period of your mortgage?

 

 

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