The government has estimated that there are more than 10,000 rogue landlords operating nationwide, many of whom own England’s 500,000 houses in multiple occupation (HMOs).
However, there is no single, UK-wide government database of rogue landlords. Similarly, there is no single database of all UK HMO properties being vetted and managed for licensing law compliance and tenant protection.
There are a multitude of ways that a mortgaged residential property can be let illegally. Some landlords breach the terms of their standard owner-occupier mortgage contract by letting the property out without lender approval. Perhaps more seriously, even where a BTL mortgage is correctly in place with the lender, it can be in breach of regulations and minimum standards. Both of these scenarios can carry significant risk for the lender.
Scotland and Wales have both introduced a national landlord registration scheme. This is also yet to take shape in the UK.
Below are three ways Kamma can help mortgage lenders:
Price mortgages accurately
Licensing affects property value. A BTL mortgaged property without the requisite licence approved for rental can expose a lender to debt service risks such as void periods and mandated improvement works to a property, not to mention fines and prosecution of mortgagees.
There are three types of Property Licence schemes: Mandatory, Selective and Additional. The geographic reach and scope of conditions vary by scheme type, location and occupancy configuration of an individual property. Mandatory Licensing is nationwide but Selective and Additional vary depending on the council or borough where the property is located, and are complex and dynamic. Kamma is the one unique platform to clearly inform licensing status of every property UK wide in an instant.
Monitor back-books
The Kamma platform allows mortgage lenders to gain instant licensing and Article 4 determinations for origination or remortgages. This accurate data can be incorporated into the underwriting, so risk is based on data and not assumptions. The user friendly nature of the Kamma platform makes it easy for underwriters and other mortgage professionals to start using the data immediately, with no training required and no switch on fee.
Kamma provides lenders with an accurate, up-to-date view of the back-book, so lenders can see the application of licenses for properties and rectify these against their data. Thus allowing lenders to review if mortgagees have the correct mortgage products associated with their property and an opportunity to reassess mortgage risk, as well as offer new products to their customer base.
Lend Confidently In New Areas of the PRS
The potential for council intervention in BTL properties carries with it significant risk for mortgage lenders. Fines, as well as mandated property improvement works with extended void periods, can all have a huge impact on a mortgagee’s cashflow, potentially impairing debt service. Due to the divergent regulatory nature of property licensing, as a result of the devolution of powers to individual councils, it has been nigh on impossible to quantify this risk to individual address level at scale, leading many lenders to shy away from HMOs or even the entire BTL market.
With Kamma, lenders can much better understand the collateral that they are lending against, and offer mortgages in new areas of the BTL market such as HMOs. The ability to understand the risk associated with individual properties rather than just the sector as an aggregate allows lenders to move into potentially lucrative new niches in the PRS.
How to get started
With Kamma, lenders can access and leverage this intelligence simply, instantly, and at scale. Either directly through our cloud based platform, or via an API, Kamma allows mortgage lenders to analyse detailed licensing and Article 4 planning requirements on their back books, and on new origination’s and remortgages.
Other benefits
The availability of this information not only enhances the understanding or risk, informing lending suitability and pricing, but also has a tangible operational impact by reducing the administrative burden. One Kamma client has measured this as reducing their mortgage approval process by 4.2 days per BTL mortgage application, reducing costs but also significantly improving their Net Promoter Score with brokers.
Contact us or book a demo now to understand how Kamma can solve property licensing for you.
