Major buy to let lender shuns benefits tenants

by Mark Alexander

16:43 PM, 22nd February 2013
About 8 years ago

Major buy to let lender shuns benefits tenants

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Major buy to let lender shuns benefits tenants

Major buy to let lender shuns benefits tenantsMortgage Brokers across the UK have been advised by Nationwide Building Society’s specialist buy to let mortgage arm (The Mortgage Works) that they are changing their criteria to stop buy to let investors letting their properties to tenants in receipt of benefits.

A survey from housing charity Crisis, released just before Christmas, claimed that 98.5% of landlords don’t accept benefits tenants already. We doubt very much that’s true as in some areas of the UK vast elements of the population are claiming benefits and renting from private landlords.

Could this move from The Mortgage Works be a knee jerk reaction to Universal Credit perhaps? When that kicks in no landlords, private, charity  housing association or other will have rent paid directly to them. When the new rules take effect all benefits will be paid directly to tenants which many believe will be a recipe for disaster.

Might this be the Governments way to convince a large section of our indigenous population that living off handouts isn’t the way forward?

Does The Mortgage Works policy make sense?

Many landlords will agree that as it’s virtually impossible to recover any unpaid rent or costs of damages from a benefits claimant and therefore, it makes commercial sense not to rent to them anyway. On the other hand, some landlords have no choice.

Questions have also been raised as to what happens if a tenant falls on hard times during a tenancy and resports to the benefits system. Will their landlords now have to serve notice on them and re-let the property to people not claiming benefits?

The social implications of this are also potentially massive. Everybody needs a roof over their head. If people can’t buy or rent properties, how long will it be before we see the masses living in tents?



Comments

Neil Patterson

17:07 PM, 22nd February 2013
About 8 years ago

This is Hard Hitting stuff and should be covered by TV news in my opinion.

1. Is this a corporate sanctioned form of discrimination
2. Is it Immoral
3. How would they ever know if a tenant was made redundant and claimed benefits. The Landlord might not even know and probably wouldn't be told if the rent was up to date.

I know it has been a criteria of Lenders in the past, but we all now live in a different climate and most of us have suffered at the hands of The Credit Crisis in one way or another.

Everyone talks about the Housing Crisis, but when is anyone including Councils, Government, Shelter or anyone else going to do anything other than try to make it hard for the PRS.

Vive La Revolution

I am off for a lay down now!

micky alderson

22:43 PM, 22nd February 2013
About 8 years ago

I'm with you on this one and me and Muvva had a pop at one of our lenders who refused to give us permission to re-let one of our properties to a young family that had a run of bad luck.

We confronted the lenders CEO who reversed their policy regarding people on benefits after a few well chosen words from me and the Moose. I always comply with the lender's T&C's but this was a point of principal. Good Tenants deserve help NOT more crap !!!

5:02 AM, 23rd February 2013
About 8 years ago

Practically every single LL who has a mortgage and is letting to LHA tenants is in breach of their mortgage conditions which state no DSS tenants.
Whether they mean no DSS at the commencement of an AST or even if a tenant not on HB subsequently receives a small or even total HB is not made clear in any lender's mortgage conditions.
Clearly some sort of pronouncement from the CML would be appropriate as otherwise LL will just start booting out DSS tenants and replacing them with non - LHA tenants.
No LL wants to risk foreclosure because of breach of mortgage conditions.
It is well known that lenders are looking for any excuse to get rid of LL on cheap mortgage deals.
Lenders would be perfectly within their rights to ask LL whether their tenants are in receipt of ANY HB at all.
I'm sure lenders would have ways of confirming whether a LL was telling the truth.
Would LL wish to risk their property for 1 HB tenant!?
NO they will boot the tenant out and source non-LHA tenants.
Councils and county courts will be soon overwhelmed as evictions and subsequently homeless people fetch up at the council offices!!
It would be interesting as to how TMW intend to police their no HB tenants condition!?
BTL lenders; I presume are perfectly within their rights to insist the mortgage is only granted providing a certain tenant class is rented to.
These mortgages are proffered based on underwriters business risk assessment; which is why they offer the loans.
Telling them you intend to rent to HB tenants will normally result in a decline of mortgage credit for BTL property.
It would seem therefore that the vast majority of the PRS HB sector is being operated fraudulently by LL either knowingly or unknowingly being in breach of their mortgage conditions.
This situation will be further exacerbated as has been mentioned by UC where LL won't know where the rent has come from, if it is the full rent.
I'm sure when most LL go for investing in BTL property they do not advise the lender that they will be letting to HB tenants even though that is their very intention!
So basically we have LL committing mortgage fraud to provide much needed accommodation for people who for whatever reason cannot or don't wish to purchase a home for themselves.
Would society suggest that these LL comply with their mortgage conditions immediately and evict HB tenants!!!??
There would be uproar; but would the banks care!!?.................................I don't think so.
They are being shown to be increasingly merciless towards LL; MX being a classic example.
Banks will try and recover all that cheap money from LL and to hell with the consequences.
The fact that this would throw millions of tenants onto the streets would be of NO interest to the banks, they just want their capital returned so that they can go and lend it out at higher rates.

Gary Silver

13:05 PM, 25th February 2013
About 8 years ago

You really cant blame the lenders for not lending if the tenants are on LHA.
Quite simply in so many cases the rent will NOT be paid.
The new ruling within Universal Credit of paying the tenant directly is quite simply ludicrous. People in and out of the housing industry know that the rent will not be paid.

This simply MUST not be allowed to happen or mass homelessness will occur.

IDS has to come to his senses or MUST GO and make way for somebody who actually understands the situation

david Brinsden

15:45 PM, 25th February 2013
About 8 years ago

I have already started winding down my LHA portfolio (8) as I can see it all ending in tears.

micky alderson

17:49 PM, 25th February 2013
About 8 years ago

I wonder if thr E.C.of H.R. would have a thing to say about this ?

18:31 PM, 25th February 2013
About 8 years ago

\"New rules take effect all benefits will be paid directly to tenants which many believe will be a recipe for disaster.\"Not so!Since this was introduced to North East Lincolnshire over 5 years ago as one of the 11 pilot areas, the loss of payments from benefit claimant tenants has been less in Grimsby. However I will admit when it was first introduced in the first six months we had six tenants that got themselves into a financial pickle or took advantage. Eventually three of those tenants caught up in the form of top ups, but the other three were given section 21 and asked to leave. So there will be some pain before some gain I am afraid to say, but the new system works better. Less voids, less bad payments and slightly better tenants as the worse and deliberate non paying tenants get relegated to the less desirable streets.SO THERE\'S NO NEED FOR SLEEPLESS NIGHTS!

Tony Atkins

12:34 PM, 26th February 2013
About 8 years ago

It's a real grey area: if a tenant loses his or her job during a tenancy, are landlords with "no DSS" clauses in their mortgage terms and conditions meant to give the tenant notice as soon as they start claiming housing benefit? Or what if a working tenant decides to leave his or her job and start a Master's course at the local university - as has happened to me - should I have given her notice because she now fell foul of the "no students" clause in my mortgage agreement?

18:53 PM, 26th February 2013
About 8 years ago

i agree that the universal credit system is a recipe for disaster,i have a small portfolio of 4 buy-to-lets.2 of which are housing benefit tenants,which i know from past experience that these tenants are borderline poverty cases.and the mortgage works decision is a disaster for me personaly,all my buy-to-lets are through this company,so i dont what this means for me for future mortgages.

Mark Alexander

10:53 AM, 2nd March 2013
About 8 years ago

It seems that TMW have backed down on this and will now allow landlords to let to tenants on benefits after all. This is to be considered a great win for our industry and shows what the voice of the masses can achieve.

See >>> http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9901035/Nationwide-climbs-down-over-lending-to-LHA-landlords.html

We can now focus our efforts of getting Bank of Ireland to reverse their decisions to treble the differential on their pre-2004 base rate tracker products.

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