A Non-Conforming View to Mortgages
By: Neil Dennis

A Non-Conforming View to Mortgages

How Times Have Changed

The non-conforming mortgage market has come along way since it roots in the mid-nineties. Then there were just a handful of mortgage lenders from which to choose, but these days there is much greater choice. This has been great news for intermediaries and their clients as this has forced rates down, opened up the market and brought an increasing level of respectability to the market.

Over the last five or so years we have seen more lenders enter the market, either directly or through acquisition. We have also seen many of the initial non-conforming lenders evolve. For example, GMAC-RFC entered the UK market in 1998 as a non-conforming lender and now offers mortgages for all your clients, across different product sectors.

A number of years ago, as the non-conforming market was burgeoning, a number of pundits predicted the sector would contract as economic conditions improved. Clearly this has not happened. This is because the main reasons for someone becoming non-conforming haven’t really changed.

Many clients encounter problems with their credit rating due to life changing events. These include redundancies (which is becoming increasingly common), a long term illness or divorce. The latter is probably still the biggest cause of adverse credit and divorce rates continue to rise. Then you also have self employed clients who often have credit difficulties, not because of their inability to run their business but because their customers fail to pay on time, affecting their cash flow which is the lifeblood of their business.

Improvements in technology have also been a driving force in keeping the market buoyant. More and more of details of an individual’s credit profile is now being captured and used to make decisions through lenders credit scoring systems that are becoming more sophisticated. And as technology advances, more clients will become non-conforming as more adverse credit appears on their profile.

Choices Choices

As the market has evolved, intermediaries have embraced it and appreciated the business opportunities that it offers. But as the market now offers far greater choice, which lender should you choose?

Well you won’t go wrong in putting your trust in a non-conforming champion – GMAC-RFC. Our extensive range of mortgage rates deliver a fairer deal for your clients and help you punch your true weight.

With different clients having different needs and varying degrees of adverse credit, it’s important to use a lender that can cater for everyone. Our unique non-conforming product menu means your clients pay only according to their individual circumstances. We don’t ask your clients to pay for credit issues they don’t have. For example, if they only have CCJs and no arrears, then they shouldn’t pay the same rate as someone who has also has arrears.

The menu approach has proven to be extremely popular, as intermediaries aren’t boxing in their clients. It’s very easy to follow. You take the current LIBOR rate then add a margin based upon some or all of a range of criteria and making an adjustment for any discounts applying at the time. This may sound more complex than it actually is as we have an easy to follow steps within the product guide.

The Table below shows how it can work:

	Client A		Client B
LTV	65%		70%
LIBOR	4.01% +		4.01 +
Purchase	NO	-	YES	1.75%
Remortgage	YES	1.75%	NO	-
Self Cert	YES	0.25%	YES	0.5%
Arrears	none	N/a	2 in last 12 months	0.25%
CCJs	£750	No loading	£2500	0.25%
Current discount	1.35%		1.35%
Discounted Pay Rate	4.66%		5.41%
Revert to rate	LIBOR + 2%		LIBOR + 2.75%

Note: rates correct at time of going to press and are subject to change