Cost of buying a home will increase and mortgage providers could be in contravention of existing financial regulations, unless government plans to enforce use of house sellers' packs are reformed, suggests the CML.
In its latest News and views update, the Council of Mortgage Lenders suggests homeowners and mortgage will in fact have to commission and pay for several different surveys when assessing the prospects for buying a property, because they are seen as additional to the government proposed 'Home Information Pack'.
At present, the government proposes to introduce a prescriptive home condition report (HCR) alongside "innovative automated valuation models" in order to make up an acceptable valuation for underwriting.
However, the CML says lenders have concerns about using automated valuation models, says the update, as automated models tend only to suit lower risk loans.
Moreover, any move from current valuations models to a simplified version for HIPs might in fact be in contravention of current regulatory requirements on providers to 'act prudently' when handling property sales.
"For higher risk loans, lenders will need the added assurance of a physical inspection of the property to assess the value of their security, in order to lend prudently. This is not only a sound business decision but also a prerequisite for lenders in meeting the requirements of both national and international regulators," says the CML document.
Bernard Clark, spokesman for the CML, points out the basic requirements of prudential lending rules are included in several areas of statutory legislation, so existing FSA, MCCB and international Basle regulations will be broken if lenders adhere to proposed introduction of HIPs.
At the same time as lenders would need to commission inspections for any aspects of business not mentioned within the prescriptive HIP.
Information has to be gathered, for example, about trees, says the CML, which may be too close to property and could cause damage.
Deputy prime minister John Prescott MP has also suggested the average conveyance be expanded to include a fourth "environmental" search, which will in turn increase costs, says the CML.
"It is important that neither the Government nor consumers are given the impression that lenders will be able to rely on the HCR and automated valuation models in the majority of cases. This will mean an additional cost for the consumer," adds the CML.IFAonline
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