A third of sub-prime borrowers on self cert mortgage deals will not be helped by MMR
Over 30 per cent of sub-prime borrowers, such as those on self cert mortgage deals, will remain mortgage prisoners under new Mortgage Market Review rules. This is the case despite a clause which was designed to help those trapped in their property or loans.
The MMR final consultation paper says that lenders are allowed to waive affordability rules to rescue those unable to remortgage or move house because of tighter lending criteria. In order to qualify borrowers must have had no arrears in the past 12 months. Despite the MMR listing interest only and self cert mortgage borrowers as examples of those who could benefit from the concession, a large number of the borrowers listed have too poor a credit history to qualify.
The ratings agency has said that around 30 per cent of borrowers in non conforming residential mortgage backed securities are in arrears, which equates to around 150,000 borrowers. However, the proportion of home-owners who have been in arrears at some point in the last 12 months could be significantly higher.
RMBS transactions, which have a high proportion of self cert mortgage borrowers, will be worst affected by the rules. A spokesman for the FSA has said “Our proposals are designed to ensure borrowers only get a mortgage they can afford. But as a result of irresponsible lending practices in the past, no matter what steps we take there will inevitably be some borrowers who find it difficult to get a mortgage in the future.
