Please see below guidance to Foundations approach to MPD’s and our approach to STL underwriting requirements . I hope this guidance is clear and seen as helpful to support all customers who may have used the Mortgage Payment Deferrals Scheme.
I have also included clarity around bounce back loans and our underwriting approach for Short Term let cases.
Short Term Lets
As you will all be aware we have re-entered the Short Term Let market and are confident that this market will be in high demand due to travel restrictions and peoples reluctances to travel abroad this summer. STL tenancy still has the back-up that the landlord can convert to a standard AST should they need to, although it is recognised that the AST and STL markets do not fully overlap.
Our approach – We can continue to accept STLs without the need for an AST, and assess affordability per our standard ICR rules. No other plausibility tests required.
2. Bounce Back Loans
We understand the reasons why a customer may have taken a bounce back loan and this will not be taken as a negative but is likely to generate more questions by an underwriter to ensure that a customer is not putting themselves under greater financial pressure. We will be looking at their conduct over the last 3 months and will be looking closer at deposits. We will not allow a BBL to be used in anyway towards the purchase of a new property.
3. MPDs and BTL Applications
Background – Landlords continue to have access to the Government’s Mortgage Payment Deferral (MPD) scheme until 31 Oct 2020. During this time we need a clear statement on how we treat applications from landlords who have taken out MPDs with ourselves and/or with other lenders. Whilst we understand the commercial reality of MPDs and bounce-back loans providing cost effective liquidity for portfolio landlords the difficultly comes from distinguishing these portfolios from genuinely distressed portfolios.
NON PORTFOLIO LANDLORDS <4 mortgaged properties
Our approach for landlords with 1-3 mortgaged properties:
- Landlords must disclose via their brokers what MPDs and government assisted funding they have received during C-19 (as per current declarations) No further evidence will be required.
- Landlords cannot have live MPDs on any FHL accounts. ie. They must have repaid in full any MPDs with FHL.
- If their portfolio of 1-3 properties are ALL under live MPDs (with other lenders) we understand this may cover an acceptable level of existing or anticipated voids and we are happy to consider the application.
- Live MPDs with other lenders do not have to be repaid for us to consider an application
- The use of bounce-back loans in isolation will not prejudice an application but it may prompt further due diligence where there are associated indicators of liquidity distress. Uws need to consider this in relation to the whole case taking into consideration such things like ICR, LTV, score, recent adverse no. of MPDs etc to consider whether this case is suitable for us to consider and if so what additional information might be help aid this decision
PORTFOLIO LANDLORDS >4 Mortgaged properties
Our approach for portfolio landlords (4 or more mortgage properties):
- Landlords must disclose via their brokers what MPDs and government assisted funding they have received during C-19 (as per current declarations) No further evidence will be required.
- Landlords cannot have live MPDs on any FHL accounts. ie. They must have repaid in full any MPDs with FHL.
- If < 50% of their portfolio is under live MPDs (with other lenders) we understand this may cover an acceptable level of existing or anticipated voids and we are happy to consider the application.
- If 50%+ of their portfolio is under live MPDs (with other lenders) we will only consider an application where the landlord’s personal Equifax score is 350+
- Live MPDs with other lenders do not have to be repaid for us to consider an application
- The use of bounce-back loans in isolation will not prejudice an application but it may prompt further due diligence where there are associated indicators of liquidity distress Uws need to consider this in relation to the whole case taking into consideration such things like ICR, LTV, score, recent adverse no. of MPDs etc to consider whether this case is suitable for us to consider and if so what additional information might be help aid this decision