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Self cert mortgage: why are they no longer available?

Self cert mortgages are mortgages where your income is not verified. The bank simply trusts what you put down on the mortgage application and does not call your employer, get tax returns or pay stubs or otherwise do any checking. Self cert mortgages were popular for a time, but have become almost impossible, if not completely impossible, to get.

Fraud

The main reason why self cert loans are no longer available is because people were not honest in what they were actually making, or in providing information about their income and their assets. Some of this dishonesty came from borrowers who lied or over-estimated their income or obligations. Unfortunately, some of this dishonestly also came from mortgage specialist individuals, like mortgage brokers who were paid to help buyers to find loans. The brokers wanted commissions, so they encouraged fraud and dishonesty. Nowadays, banks want to make sure that people are actually generating the amount of money which they say they do.

Over-extended buyers

Because many people lied about their incomes to the mortgage centre where they got their mortgage loan, people were approved for loans which were larger than they could reasonably sustain. This led to over-extended buyers who were not able to pay their mortgages properly. Many people believed that the property market would just continue to go up and that they would be able to refinance. This explains why people borrowed more than they could afford to borrow.

Foreclosure

Each of the above reasons helps to explain the most important reason why self cert mortgages are no longer offered. The fraud on the part of buyers and mortgage specialists, as well as the fact that people were getting mortgages which they could not afford, especially poor credit mortgage loans or sub-prime mortgages, all led to a startling wave of foreclosures. Foreclosures throughout many countries are at record highs and the real estate market is being hit hard as the market is flooded with homes which have been re-possessed by the bank. All of this had led to a tightening of the credit market and the decline or elimination of self-certification.

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