Since the Mortgage Market Review came into existence, on 26th April 2014, self-certification mortgages have been banned, and are therefore not available via UK mortgage lenders.
However, there has been some media attention brought about by a company which is based in Prague, Czech Republic, offering self-cert mortgages . That company seeks to circumnavigate the UK rules.
As a result of that company’s activities, the FCA has issued a warning on self-cert mortgages.
The Financial Conduct Authority has published a warning to consumers considering applying for a self-certification mortgage from any lender trying to circumvent European mortgage regulation.
A statement published on the regulator’s website this morning said: “In light of recent media coverage about a firm outside the UK relying on the European Electronic Commerce Directive to provide mortgages to customers in the UK without the protections offered by the UK’s mortgage regime, we are telling consumers about what this means for them.
“Previously, when consumers took out a self-certified mortgage they self-certified that the income stated in their mortgage application was true.
“Because of the harm caused to consumers in the past, this is no longer permitted in the UK and firms must check a customer can afford a mortgage, including verifying their income in every case.
“From 21 March 2016, all firms offering mortgages in the UK (including EEA firms) will have to comply with the Mortgage Credit Directive, which requires a thorough affordability assessment based on information that has been verified by the lender.”
Borrowers who take out a mortgage offered from outside the UK under the ECD will lose UK consumer protection benefits such as the right to refer complaints to the UK’s Financial Ombudsman Service and to be treated fairly when facing payment difficulties.
Under the ECD, firms can only contact customers online, not by telephone or post. This means borrowers will not be able to speak to the firm about their mortgage arrangements.
The FCA’s statement adds: “Firms providing on-line services from an establishment in an EEA State other than the UK under the ECD have to comply with the law of that state, rather than with UK regulatory law.
“If anything goes wrong, the responsibility is with the other EEA State’s authorities.
“Even if a regulated mortgage adviser in the UK recommends such a mortgage, you will not be able to get compensation from that adviser if it turns out you cannot afford the mortgage payments. This is because the adviser is not responsible for assessing affordability.”
The regulator has advised consumers to “find a regulated mortgage adviser who can give you advice on mortgage products from a wide range of lenders including those regulated in the UK”.
It adds: “If you are still considering using a firm based outside the UK, find out what protections you will have if things go wrong.
“Ask for a copy of the mortgage terms and conditions.
“Ask for the contact details of the firm’s regulator.
“Find out how the firm will deal with borrowers who fall into arrears, plus details of fees and charges.
“Remember you will not be protected by UK regulation if things go wrong, and you could lose your home if you cannot afford your mortgage payments.”
The statement comes a week after selfcert.co.uk was forced to close its doors to new applications for three months after a flood of enquiries in the lender’s first week overwhelmed staff and crashed its website.
The lender, which is based in the Czech Republic to allow it to circumvent Financial Conduct Authority rules that banned self-certification mortgages several years ago, said “a severe backlog” of interest meant it couldn’t keep up with demand.
It launched on Monday last week and by Tuesday had seen 4,000 potential borrowers register interest.
The site said: “We have ceased taking new applications until further notice, this will be at least three months.
“We are currently working through a severe backlog of people that have registered an interest in these products.
“Although we started on Monday 18 of January people have been contacting us since reports of the products returning first appeared in November 2015.”
WE SAY: As a UK based, FCA authorised and regulated mortgage advice company, we adhere to the rules and regulations of the FCA. We do not arrange, nor will we advise on, self-cert mortgages whilst they remain unregulated within the UK jurisdiction. If you need to discuss a new mortgage enquiry, we would be happy to talk to you , and will attempt to place your requirements within the current lending criteria of UK mortgage lenders. We will not become involved in any attempt to circumnavigate the rules, which could jeopardise our own business.