Landlords lose deposits as lenders pull out on completion day

Landlords lose deposits as lenders pull out on completion day

13:57 PM, 7th February 2013, About 11 years ago 9

Text Size

Landlords lose deposits as lenders pull out on completion dayI have heard lots of stories about mortgage lenders withdrawing their mortgage offers on completion day in the last 6 months or so. There is also lots of speculation as to why this might be happening.

One conspiracy theory is that CIFAS departments of mortgage lenders are scouring the internet to build a comprehensive database of unregistered property sourcers, BMV agents etc. including personal names and business names which they then cross reference with mortgage applications.

Allegedly, the database systems then also scan for patters in terms of use of solicitors, accountants and mortgage brokers. Where common matches are noted for suspicions the mortgages are then declined. The really nasty thing is is that some believe this is the final element of anti-fraud due diligence undertaken by mortgage lenders, i.e. just before completion. Therefore, if contracts have already been exchanged already and a deposit has been paid it causes havoc on completion day when the mortgage offer is withdrawn.

Of course, if this is happening it never be admitted officially as CIFAS is to the UK mortgage industry what Area 51 is to the US military. We all know it’s there and we think we know what it does in terms of sharing confidential information between lenders but it will never be admitted.

The scary thing is that once you are on this secret database (if indeed it exists) you may not be aware and may not be able to get off it.

Gossip on the street is that if mortgage lenders get any whiff of a deal being associated with an unregulated property sourcer or the words Instant Equity, BMV etc. they are just pulling offers. Apparently some of the major lenders have the FSA all over them at the moment so that might have something to do with this too.

I have absolutely no sympathy with landlords and agents who are trying to pull the wool over the eyes of the lenders but the risk affects all purchasers. How would a landlord know about this secret database for example, never mind whether their agents, brokers or solicitors are on it?

The most logical strategy we can suggest to landlords who are purchasing at the moment is to exchange contracts and complete on the same day.

If your mortgage lender does pull your mortgage offer then take a good look in the mirror and if you know you have done nothing wrong yourself, chances are one of your associated professional contacts might well be to blame? Whatever the reason it’s important to note if you have exchanged and lose your mortgage offer before completion, you will also lose your 10% deposit and run the risk of being sued for breach of contract.

Top Tip – exchange and complete as a simultaneous transaction

If the existence of this secret list is ever officially uncovered then there may well be a lot of finger pointing and litigation flying around. However, if your name ends up on this list because you have been operating as an agent without complying with the Estate Agency Act 1979 or you have been dealing with such an agent then you might not have a very good claim.

This “secret database” may well be nothing but a myth of course but you have been warned.

Share This Article


Neil Patterson

4:58 AM, 8th February 2013, About 11 years ago

Hi Mark,
Having done my time in banking the theoretical Area 51 list could theoretically be called the "Hunter Match" but if I told you I would have to kill you.

8:11 AM, 8th February 2013, About 11 years ago

Hi Mark,

Interesting to hear your views on this.

We have been having a similar discussion on Property Tribes.

It has had 85 replies and over 7,700 views, so is obviously a topic of interest.

As a landlord, I want to be warned of such potential issues ... but those that sell BMV deals without being members of an Ombudsman Scheme, or who run courses showing newbies how to market to distressed sellers via leaflets or other means will be quick to call you a scare-mongerer.

They would mostly rather try and discredit this kind of information than learn from it and improve their offering as a result.

On another forum there was the case of a newbie deal sourcer who offered out deals that turned out to be a scam. He denied that he was responsible for offering scam deals to his network saying that he did not know they were dodgy - even though anybody who did one minute of due diligence would have found massive warning signs. These kind of people are damaging to the industry as they spoil it for the "good guys" and people lose confidence in these types of services.

In a largely unregulated industry, it is empowering for the community to act like a "neighbourhood watch" and warn newbies of potential pitfalls.

Well done for bringing further visibility to this important topic.

Mark Alexander - Founder of Property118

9:14 AM, 8th February 2013, About 11 years ago

Hi Vanessa, thanks for commenting and also for linking to the related discussion on Property Tribes which, as you know, I have also contributed to. There's nothing better than sharing information and a really good example of this is cross-over commenting between forums to spread the message and also add validity to these sorts of issues.

10:17 AM, 8th February 2013, About 11 years ago

I agree Mark.

Property Tribes and Property 118 share the mutual agenda to share for the sake of sharing for the greater good of the community.

That is why we allow links out of the forums, to help spread awareness.

When people understand risks and pitfalls, they can make informed choices. That is a far more powerful place to be than someone who believes a third party's advice and information and then finds that they have been involved in a fraudulent or unethical activity.

I say "live and let live" ... everyone is on their own journey ... but at the very least you should understand what you are getting involved with.

Particularly on the thorny issue of NMD deals, ignorance is no excuse in a court of law.

I currently know of two major property gurus who are "of interest" to the Fraud Squad.

These cases can often take 3 to 4 years to build before the person has their collar felt, so people should not be be naive to think "it hasn't happened yet" because it could .... but it might be in 3 years time.

Property is most successful when viewed as a long game with an ethical approach to serve the needs of tenants. GRQ and "something for nothing" has no place in such a business imho,

Mary Latham

13:29 PM, 8th February 2013, About 11 years ago

I am so glad that P118 is picking up on this. When the thread on PT was first published I thought great now people will become aware of these important issues. The lenders have been talking to knowledgeable property people for over a year now and they have a much better picture of the risks that they were taking that they were unaware of before.
Apart from the problems of the OR overturning sales, they now know that landlords might buy a property to convert into an HMO in an Article 4 area or a Selective licensing area. They are also aware that many people are buying property to let who know zero about their statutory obligations and this could 1. Lose them bedrooms, cost them 400% of tenants deposits, leave them open to expensive litigation etc. All of this increases the risk for the lenders. I don't think it will be too long before the lenders ask Are you accredited through an education based scheme? Are you a member of a landlords organisation which will provide you with valid documents and a support system if you get into difficulties. The lenders could help to clean up the landlord business and I say well done them.
Follow me on Twitter@landlordtweets

Mark Alexander - Founder of Property118

19:41 PM, 8th February 2013, About 11 years ago

All very good points Mary. The due diligence we are seeing from lenders now was first discussed four to five years ago. Hopefully they will implement your very sensible suggestions quicker than that

0:52 AM, 9th February 2013, About 11 years ago

It is easy to find out if National Hunter or CIFAS have anything on you; just submit a SARN to each!
I did and there is nothing on me. not that there should be!
National Hunter is of course how ALL lenders compare info.
So one should always keep a copy of any application for any financial credit makes so that the info remains the same otherwise NH will flag it up for futher investigation!

Joe Bloggs

17:57 PM, 10th February 2013, About 11 years ago

some good points about knowledge/experience/training. however the reality at present is the opposite. i have a very profitable portfolio partly due to my knowledge/experience/training and yet the last time i tried to get a BTL mortgage all those factors counted against me as my portfolio was in their eyes too large!

Mark Alexander - Founder of Property118

2:25 AM, 12th February 2013, About 11 years ago

You need to consider changing brokers then. You may well have outgrown the traditional BTL lenders but there are plenty of lenders out there targeting larger portfolio landlords via commercial finance brokers I can assure you. That said, of you have that many why would you want to keep buying?

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now