Why Do We Need A Mortgage Responsible Lending Policy?
Responsible lending is defined as acting in a customer’s best interests, ensuring affordability, transparency of terms and conditions and supporting a borrower should they experience repayment difficulties.
All lenders have a duty and responsibility to make sure borrowers understand the details of any loan and carry out thorough checks on any borrowers, so they can be confident that the product the customers receive will be suitable for their circumstances.
A major focus for the Financial Conduct Authority (FCA)
Central to any responsible lending has to be an assessment of customer affordability. Managing affordability is a significant challenge for the UK credit industry and is a top priority for the FCA.
The FCA’s guidance on ensuring a customer’s ability to pay and responsible lending, states a firm must be able to show that the customer’s ability to repay was taken into account. In addition, lenders must take account of the customer’s actual or reasonably anticipated income (needs to be well documented), in reaching a decision on whether to enter into a mortgage contract.
Monitoring affordability assessment
The FCA launched the Mortgage Market Review (MMR) Data Reporting, whereby it can monitor information from mortgage providers to supply to them as part of their mandatory reporting requirements.
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