Communication from The Melton Building Society:
HOW CAN YOU HELP CLIENTS WITH ADVERSE CREDIT?
By Dan Atkinson, Head of Sales & Marketing, MBS Lending
The adverse credit market is growing all the time, largely due to unprecedented levels of borrowing. There can be many reasons for a client having an adverse credit profile such as CCJs or missed payments. However, sometimes it’s just that the client’s circumstances do not fit mainstream products or they have experienced short-term issues such as a loss of earnings, divorce, illness or other difficult life events that may have affected their financial situation.
Home ownership is a better long term investment than renting and establishing a pattern of consistent payments and responsible credit usage is a key step towards repairing poor credit. Niche lenders, such as MBS Lending, are able to provide the individual assessment and wider lending criteria required to help clients with adverse credit achieve their home ownership goals.
Some of the most common credit impairments include:
Generally missing a mortgage payment is considered one of the worst types of default and many lenders are reluctant to lend on this basis. However, at MBS Lending we will consider up to 3 missed payments in the last 12 months (1 in the last 3 months).
IVA or DMP
IVAs allow clients to write off some of their debt and are legally binding, whilst DMPs are more flexible and all the debt is repaid. In most cases mainstream lenders will require for DMPs to have been fully paid out, followed by 12 months of on-time payments before considering offering a mortgage. In the case of IVAs, clients often need to wait 3 or 4 years after completing the plan before applying for a mortgage.
At MBS Lending we do things differently and we will consider clients with an IVA or DMP that is still active, subject to 6 months satisfactory conduct.
A county court judgement, or CCJ, can be ordered if someone owes money and fails to pay it. Most lenders will only accept a CCJ if it is over 3 years old and fully satisfied. MBS Lending, however, will consider CCJs up to £6,000 that have been fully satisfied in the last 2 years.
Most high street lenders will refuse to lend to people with bankruptcy on their record, whilst some more specialist lenders may consider bankruptcy discharged more than 6 years ago. At MBS Lending there is no delay and we will consider clients who are fully discharged from bankruptcy from day 1.
Unlike many lenders, we will consider clients with a history of repossession if it took place more than two years ago.
To help make home ownership with impaired credit a viable option for more customers, MBS Lending has recently increased the LTV on all our standard products to 70%. Whilst for first time buyers, MBS Lending offers Shared Ownership products up to 90% of the share being purchased, subject to a maximum overall LTV of 60%.