Nationwide Mortgage Works Housing Benefit U Turn
David Lawrenson of Private Rented Sector Consultants LettingFocus.com looks at why some mortgage lenders don’t want to allow landlords to let to tenants who are dependent on housing benefit to pay their rent.
Last week, at this blog, I looked at Nationwide’s new policy (for the Mortgage Works) to not allow landlords taking out mortgages or remortgages with them to let their properties to tenants who are on housing benefit.
The story also appeared in a lot of the specialist and mainstream press last week, where the policy was criticised by some.
Then, on Friday, Nationwide did a sudden about turn and said it was allowing landlords to do theses types of lets after all.
We cannot speculate on the reasons behind the change of policy, though we think it unlikely that the government put any pressure on Nationwide. After all, part state owned Lloyds Banking Group and Yorkshire Building Society still have similar restrictions in place. (In my blog piece I had said that Nationwide’s move could be seen as an indictment of the government’s welfare changes, specifically the numerous changes around Housing Benefit/ Local Housing Allowance).
Lenders Concerns
So, why are lenders worried about landlords doing these sorts of lets?
One of the issues some lenders say they have is around a receivership / recovery situation (i.e. where a landlord has defaulted on the mortgage loan and a receiver of rent has been appointed) and where a tenant on housing benefit is still in situ.
The issues the lenders have in such situations are these:
1) establishing what rent is due (if any) and from whom
2) getting that rent paid direct to them (if over 2 months arrears) or immediately if other relevant tenant vulnerabilities exist and
3) concerns that Housing Benefit depts can claim back overpayments of Housing Benefit years later.
At LettingFocus, we think a sensible level of co-operation between lenders, their appointed receivers of rent and the department that pays out housing benefit would solve a lot of these issues. But the mortgage lenders do not seem to be talking to the government to try to solve these issues, and the government seems confused and unable to take the lead either.
This is why we said there seems to be something of a “lack of grip” on the private rented sector by government agencies at present.
Over-reaction
Are the lenders overreacting with such blanket restrictions?
We think they may be.
For example, one would question where is the real risk of a financial hit to the lender in cases of loans where the landlords’ loan to value was low, say at less than 60%.
If lenders have concerns about the three issues highlighted here and if there is a lack of will to solve them, then, in the interim, they could always look to selectively restrict loan to values on buy to let loans for housing benefit lets or make them dependent on other more “positive” variables.
But a blanket restriction such as YBS and state owned Lloyds Bank’s BM Solutions have on new landlords letting to HB tenants seems, to us at least, to be not necessary and clearly not ideal in the current housing crisis, where those dependent on housing benefit are already finding very few landlords will accept them.
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