Mortgage reference wording

Mortgage reference wording

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I have received mortgage requests from three lenders in the last two weeks. All of these have insisted that I must complete the form as it is and that "information provided in any other format will not be accepted".

Naturally, the wording as it stands would leave me wide open to being sued if my client were to default or his income turned out to be lower then I had predicted. The ICAEW produces a really useful example letter and guidance, which advises against completing standard forms provided by lenders for a number of reasons. Failure to follow such guidance might well mean that my insurers would then not be obliged to pay out on my PII policy. In any case, I don't want to be the first one to find out.

Of course, I discuss the restrictions with the clients when they ask me to provide the references. I can't say they are too happy about it as they just want their mortgages. The lenders don't help matters by insisting that I'm the only accountant they have ever come across who is not willing to sign the letter as it stands, including the bits about predicted future income. They tell my clients this as well, which isn't good for client-relations.

So where does that leave the poor old accountant? Isn't it about time we pressed for a standard letter from lenders? We have one for audit bank letters. I'm prepared to push this further if I have enough support.
Jessie

Replies (15)

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By AnonymousUser
11th Jun 2009 22:53

What is the magical wording
I would love to see the magical wording the ICAEW has adopted

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By User deleted
11th Jun 2009 19:09

Thanks for the advice
I opted to send my own letter and ignored the lender's letter completely, being as helpful as I could to my client whilst ensuring I followed ICAEW guidance. I have heard nothing further, so at least it was not dismissed out of hand.

The broker told the client that every other accountant just signs the letter without question! Having discussed matters with him, the client seems happy that I have been positive and factual so I'll see what happens.

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By User deleted
11th Jun 2009 18:53

Nick
Generally, I don't charge anything. There was guidance some time ago that not charging might avoid the possibility of an implied contract.

Just adds insult to injury really - you upset your client AND don't get paid!

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By Nick Stewart
10th Jun 2009 09:50

Fee for completing reference
I'd be interested in hearing about the typical fee that is charged to a client for completing a reference as we seem to have more complaints from clients on this than any other service.

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By Malcolm Veall
09th Jun 2009 12:21

Ignorance
Not a major contribution but another eg of failed training at banks, that I, at least, found amusing:

Queried with me why profit in statutory P&L was different to that in the detailed P&L - he was comparing profit to the bottom figure on the last page, which was a sub-analysis of expenses, and the bottom figure happened to be bank charges.

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By AnonymousUser
08th Jun 2009 16:27

I'll join this bandwagon

I recently received a list of questions from a mortgage intermediary which included the following gem:
"Is this a Sole Trader, Limited Company or Partnership?" with a yes/no box.
So I ticked the "yes" box. I wonder how often somebody ticks the "no" box.

There followed this sequence of questions:
15, Annual turnover
16. Net profit before taxation, salary and drawings
17. Dividends paid to applicant
18. Spouse's income

Then the admonition "If the accounts are not prepared by a UK practising public accountant authorised by ACA/ACCA/CIMA/AAT/CPA and holding a valid current practising certificate, please provide HM Revenue & Customs (HMRC) confirmation of self-assessment figures".

Oh my eye.

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By martinfoley07
08th Jun 2009 12:48

jessie........
.......some suggestions
(i) be very, very careful NOT to make this a negative "technical" stand, most especially in the eyes of the client. Show the client you want to help them and the bank achieve the loan. Then you will not lose the client (or the loan). Persuade them it is merely a sensible commercial approach (which it is of course)
(ii) work around, rather than through, the broker in as friendly a manner as possible. You might have to deal with the broker, but do not do battle with them, however appalling they be in trying to tell you and your client that you are the only difficult accountant they have ever come across. It is probably a lie, or they have only dealt with incompetent accountants. Either way, ignore it. It is the broker who is more likely to lose you the client, not the bank, in most of these situations.

Handle the client, the bank/lender, and the broker - in that order.
Get the client onside by assuring them you will facilitate the loan (NOT block it!!).
Even in these times of difficult lending, you will then achieve your objective of a happy client with a loan and with no untoward financial exposure to you.

(And yes, I believe that is all achievable, even today, by submitting the information to the bank in a format that you are comfortable with. If you want to post the name of an institution that you consider is not accepting your reasoned approach, by all means do, so we can comment on specific examples of that institution).

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By User deleted
08th Jun 2009 11:45

Interesting replies so far
Clearly, I'm not alone in finding these letters irritating, especially because of the lack of knowledge held by some of those who send them to us. I have held my ground in spite of complaints from lenders and clients. It has damaged relationships with one or two clients, who moved to other accountants who were happy just to sign. I do wonder if any of these have been sued by lenders.

I'm afraid I can't agree with the idea that clients will still get their mortgages even if we don't complete the forms. This has been the case for many years but lending is very different now and loans are harder to get.

Please keep the comments coming. If I am going to take this further, it would be very helpful to have as wide a range of views as possible.

Andrew, do you mean appropriate wording for the letter from lenders or for our reply?

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By AnonymousUser
07th Jun 2009 18:03

Im confused
What would the appropriate wording be then?

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By rhangus.
07th Jun 2009 09:54

geoff
that sums it up for me.
i think these badly qualified and silly people who take 10 days and 2 hrs to qualify should take the word of anyone who has an accounting o level or 6 months bookkeeping experience or get themselves better qualified before they start giving clients an ear full of their poorly qualified guff.
What say u and the rest?

They should not be any where near my clients advising them on their biggest personal purchase. its a disgrace.

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By geoffwolf
06th Jun 2009 23:36

some time ago
a client sole trader client was refused a mortgage on the grounds that dhe had made a loss ( profit £45000, drawings £45002). Howevever after I insisted on talking to the fool at the lender who made that error the mortgage was granted.

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By rhangus.
06th Jun 2009 20:13

I hate to
agree with that Nedd bloke but I do.

I get slightly perturbed when the potential lender asks what are your clients drawings or net profit when if it has to be anything at all it should be what is their taxable income. I then try to suggest to them that they should look at s/e people completely differently to thoise who are employed.

Drawings i try to explain could bear absolutely no relationship to profits.
Then I say but the s/e man does not have a lot of the outgoings that a employed man has and he does not get that either. Then they ask if i'm qualified and when I pick myself up off the floor after laughing and then i say qualified for what, as you already have no clue about your way around a balance sheet or p & L a/c. I despair.

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By User deleted
06th Jun 2009 16:47

disclaimer
I have been writing disclaimers on the bottom of their forms. I also add comments wherevery I fell it is appropriate. It can make it look a bit messy, but I am not prepared to send in a form without a disclaimer.

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By Ned Ludd
06th Jun 2009 14:26

reassuring...
...to know that other people encounter these problems.

ive lost count of the times a director of a close company receives the letter asking for income from self employment.

ive had many a debate on the phone with brokers and lenders who simply do not understand that a director receives remuneration as salary and dividends and not by way of profits.

i only fill in the form if the lender is particularly uppity about it but then theres usually an epistle from ourselves attached as the forms are more often than not useless

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By User deleted
06th Jun 2009 11:30

court ?
It would be interesting to see a lender actually attempt to hold the accountant responsible for a clients default. I suspect it would be laughed out of court.

However, personally I supply my owwn letter - if the lender wont accept it - I tell the client to walk away, take them to see my own bank manager, and arrange the mrtgage for them with the minimum of fuss.

Plus it keeps my bank manager sweet because I never take him dubious prospects.

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