Paragon Mortgages will implement the Prudential Regulation Authority’s (PRA) Phase 2 changes, which require more thorough portfolio landlord underwriting standards – those with four or more mortgaged properties – for all new applications received from Monday 17th July.
All buy-to-let lenders must implement the new standards set out by the Bank of England’s PRA by 30th September 2017.
Paragon’s decision to implement changes ahead of the PRA deadline reflects the fact that the new standards require only minimal changes to its existing approach, as well as a desire to give intermediaries as much time as possible to make any necessary adjustments ahead of the mandatory deadline.
As from Monday, brokers should route all applications from portfolio landlords with four or more mortgaged properties exclusively through Paragon Mortgages. In addition, as is currently the case, any application from a limited company landlord or from a landlord seeking finance for a House in Multiple Occupation (HMO) or Multi-Unit Block (MUB) should also be submitted to Paragon Mortgages.
Mortgage Trust will focus on applications from individual landlords with three or fewer single, self-contained mortgaged properties.
Paragon will continue to request that all applications are accompanied by a comprehensive property schedule and seek additional documentation as required to fully understand each landlord’s business, including an asset and liability statement, cashflow details and a forward-looking business plan.
John Heron, the Managing Director of Paragon Mortgages, comments on the decision: “Currently, many lenders focus mainly on the rental income and value of the property they are lending against when underwriting buy-to-let property.
“At Paragon, we’ve always asked for information on all the properties a landlord holds and on the full range of their economic activity, so that we can assess their business in the round and consider the impact of the new lending on their performance.”
He adds: “Against this background, this implementation of the PRA Phase 2 changes should result in minimal change for intermediaries and their customers.”
Earlier this week, Aldermore released a new guide on its updated portfolio landlord underwriting standards.