"It’s great to know that there is still a human element to mortgage underwriting, something that all too often is a ‘computer says no’ scenario."
“They can be a bit complex or very niche. We look at each, understand the scenario and make a decision,” said Colin Fyfe, Hinckley & Rugby chief executive, at the meeting relocated for the day to the North West England offices of Sesame Bankhall Group, which supports members of both PMS Mortgage Club and Sesame Network.
Around the table were Sesame Bankhall Group staff, including lender relationship manager Andrea Rutter and national new build relationship manager Stacey Wood, and mortgage intermediaries from the North West including Nick Moynihan from Platinum IFS.
Hinckley & Rugby’s Mortgage Referrals Committee (MRC) usually meets at the Society’s Hinckley head office. But to develop its understanding with a major introducer mortgage club and network, and to show them how the underwriting decisions are made, the MRC was held for one day at the Sesame Bankhall Group offices in Sale, near Manchester.
The MRC routinely uses the expertise of Colin, chief customer officer Dean Waddingham, head of sales and marketing Carolyn Thornley-Yates and senior underwriting manager Sarah Johnson. They were all at Sale, as were fellow MRC regulars from H&R for Intermediaries business development team, Emily Smith, Evan Crosskey and Alice Baggott.
The Sesame Bankhall Group team and the intermediaries had a front-row seat as the MRC took a look at a range of cases, each with their own complexities.
The cases considered included: applicants who work on fixed-length contracts; parents helping a son, and a son helping his parents; later life lending to applicants in their 70s; downsizers with buy-to-lets; and even applicants who want to build a swimming pool.
Sesame Bankhall Group’s Andrea Rutter said: “Watching the committee in action was superb. It’s great to be able to lift up the bonnet and see what happens. It was really good and well worth the time.”
Nick Moynihan from Platinum IFS said: “I found it interesting to sit in and contribute questions and comments. It’s great to know that there is still a human element to mortgage underwriting, something that all too often is a ‘computer says no’ scenario. Sometimes things aren’t so black and white.”
The Society also invites brokers to join in the daily MRC meetings via video conferencing such as Skype. They are also welcome to visit Hinckley to sit in on an MRC meeting.
Colin Fyfe said: “The great thing the MRC offers is that a 15-minute phone call between an intermediary and one of our business development team by 2.30pm means that case will be looked at between 3pm and 4pm that same day.
“The seniority of the MRC members means there is no-one to second guess us. We make the decisions.”
The PMS and Sesame member cases considered at Sesame Bankhall Group’s offices that day included:
Case 1: £500,000 interest-only loan at 42% LTV for a five-year term, to pay off the mortgage on a buy-to-let and build a swimming pool.
The applicants are 54 and 65, with one a high earner. The BTL is rented to a disabled brother and a second BTL is currently sold subject to contract. Including all current debts, the loan to income (LTI) is 4.85. The MRC decides to seek a declaration that the debts will be cleared. In which case, it’s a ‘yes’.
Case 2: £207,000 interest-only loan at 28% LTV for a ten-year term, to finish the applicants’ third self-build project.
The 68 and 63-year-old applicants have two other self-supporting properties in the background and income multiples of 4.48. With employment and retirement income, and a maximum calculated loan size of £207,000, it’s a straightforward ‘yes’.
Case 3: £210,000 interest-only loan at 56% LTV for a seven-year term, to capital raise the deposit for a downsizing property they want to improve before occupying.
The applicants, 63 and 55, intend to sell their current home after moving, using the proceeds to reduce the current mortgage balance of £732,000 on their ten-unit BTL portfolio. One of the Sesame Bankhall Group team asks if the MRC is concerned that the property may become another BTL. The underwriter questions the income and mortgage balances, but the BTLs are self-supporting. The MRC decides to go back to the broker for further affordability checks and to find out if the applicants would put both their residential mortgages with Hinckley & Rugby. Hence, it’s a ‘maybe’.
Case 4: £324,000 retirement interest-only (RIO) loan, for remortgaging applicants aged 72 and 68.
Very good LTI and net free pay. There are eight self-supporting BTLs and the husband’s pension is 50% transferable to his wife. The mortgage is affordable individually too. With RIO being an available proposition at Hinckley & Rugby, the MRC says ‘yes’.
Case 5: £250,000 interest-only later life loan at 37% LTV for a 10-year term, for a next-time buyer aged 69.
Income is from a company the applicant owns with his son which generates dividends. The applicant also has pensions and land and property income and there are unencumbered BTLs too. The LTI is 3.36 and net free pay is 48%. The MRC says ‘yes’.
Case 6: £153,000 joint borrower sole proprietor five-year fix repayment mortgage for a first-time buyer at 90% LTV.
It’s a split term JBSP with the 58-year-old father able to support the loan for 17 years until retirement and his son, 27, able to afford £89,000 on his current income. The father’s £100,000-plus income makes the argument for affordability. It’s a ‘yes’.
Case 7: £322,000 joint borrower sole proprietor five-year fix interest-only mortgage with a son in to provide affordability for his parents who are seeking the 43% LTV like-for-like loan.
The son is on a five-year contract as a professional player in an emerging sport. Dad is self-employed. The MRC focuses on the son’s contract as key. The underwriter will scrutinise the contract and bring it back to the Committee if need be. Otherwise, it’s a ‘yes’.
Case 8: £400,000 remortgage at 27% LTV for a 19-year term. The capital raising is to pay current and future school fees for the 49 and 50-year old applicants’ four children.
There is an inherited nine-strong portfolio of unencumbered BTLs and the repayment vehicle is a mortgage-free flat in London. The underwriter wants to know where the capital will rest as the children’s years of education unfold. And the MRC wants to see the accounts of the applicants’ linked and jointly owned property companies. It’s a ‘maybe’.
Case 9: £350,000 repayment five-year fix at 67% LTV for a 25-year term, for a next-time buyer who is a professional sportsman.
With plans to professionally compete in his sport for another 15 years, the MRC looks at the applicant’s self-employed income and his insurance arrangements for a sport where injury is a risk. There’s a tick for it being a repayment mortgage. There’s a question mark over whether he would later seek to turn the rural property into a business. Could he render it unattractive to future buyers? The MRC gives the case a ‘yes’, but only subject to valuation.
