With the financial upsets of 2009 there was always going to be a lot of unsettled areas within the finance sector. Apart from homeowners and small business owners finding it increasingly difficult to obtain a loan, there is another sub-sector who will now find it even harder to get their hands on money.
The sector in question is those who are self employed and who were able to self certify loans for any purpose. Self-certification is where the borrower does not have to show any proof of their earnings.
The issue with self cert loans is they are open to abouse and borrowers looking for things like homeowner loans were quick to exploit the loophole. Being self employed doesn’t always mean you are in work all year. As a consequence there would be times where a dip in income during the year left them unable to repay back any loans.
What will happen to this relatively large sector of workers who want to get aloan for all manner of things including mortgages?.
Well, it seems like the regulatory body has devised a straightforward solution and that is to force lenders to do a lot more investigating on borrowers. And more specifically the borrowers will now have to produce their tax returns in order for the lender to obtain a much better idea on how much the self employed person earns. And along with the tax return checks the lender will also need to pay closer attention to the borrowers exact outgoings compared to their income.
This wont be warmly welcomed by those working for themselves but given that a lot of recent repossessions were due to non-payment from those with self-cert mortgages it’s easy to see why. As a result they were unable to keep up with repayments which they clearly knew they could not pay back from the start.
It is now much more difficult to get a self-cert loan due to the unscrupulous activities of others. But at least there is still a route to getting a loan, even if it’s going to mean jumping through lots of hoops first.
