Santander has begun accepting applications from mortgage prisoners in a limited set of scenarios and will be using an affordability assessment when doing so.
The Financial Conduct Authority (FCA) published guidance a year ago designed to allow lenders to support mortgage prisoners trapped with inactive or unregulated lenders.
They can use a modified affordability assessment where borrowers are up to date with their mortgage payments, do not want to borrow more, and want to remain at their current property.
Santander said its facility will be open to all registered intermediaries where a client has received a letter from a third-party administrator on behalf of the FCA identifying them as a mortgage prisoner.
It highlighted three scenarios where it would be able to consider cases:
- Failed standard like-for-like remortgage affordability assessment/loan to income policy
- Failed standard LTV policy
- Light adverse credit performance outside of existing policy.
And it also listed the types of cases where it would not be able to accept applications:
- Current or recent (e.g. last 12 months) mortgage arrears
- Failed affordability based on assessment against reversion rate1
- Significant adverse (e.g. defaults and CCJs in last 3 years over £500)
- Capital and interest loans over 90% LTV
- Interest only loans over 70% LTV
- Part and part loans over 85% LTV (max 70% LTV interest only)
- No established interest only repayment vehicle
- Cases with additional borrowing
- Outside of other policy criteria e.g. credit scoring, age-related e.g. IO to maximum age 70, security or leasehold requirements.
The lender said it has set up a dedicated team who can review and manage these cases if a client has received a mortgage prisoner letter.
Once an application in principle (AIP) has been submitted that meets the criteria, advisers must contact the mortgage prisoner exceptions team with the AIP case reference.
The team will then review the case and respond within 72 hours.
West Bromwich Building Society was one of the first lenders to adopt the modified affordability measures, NatWest and Halifax have since followed suit.
Owain Thomas is features and contributing editor of Mortgage Solutions and editor of Specialist Lending Solutions.
He also has experience in the protection, pensions, workplace benefits and HR areas.
Owain has won two Headline Money Awards and the Protection Review’s Journalist of the Year award.