13 July 2017
Paragon will implement the PRA Phase 2 changes, which require more thorough underwriting standards for portfolio landlords with four or more mortgaged properties, for all new applications received from Monday 17 July.
Applications from portfolio landlords, limited companies and for more complex property types to be routed via Paragon Mortgages
Applications from individual landlords with three or fewer single, self-contained properties to be routed via Mortgage Trust
Minimal change for intermediaries introducing new business
All buy-to-let lenders must implement the new standards set out by the Bank of England’s (BoE) Prudential Regulation Authority (PRA) by 30 September 2017. Paragon’s decision to implement the changes ahead of the PRA deadline reflects the fact that the new standards require only minimal change 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, you should route all applications from portfolio landlords with four or more mortgaged properties 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 a 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 Mortgages 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, Managing Director, Paragon Mortgages, said: “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.
“Against this background, this implementation of the PRA Phase 2 changes should result in minimal change for intermediaries and their customers.”