References for mortgages
Question
I am a CIMA member working as a sole practitioner.
Occasionally clients ask me to provide a financial reference for them in support of a mortgage application.
It is very embarrassing if the mortgage lender then returns the reference because chartered management accountants are not recognised on their list of approved financial referees.
Ultimately, I stand to lose clients if they no longer feel I am a 'real accountant' because I have to pass these references to an ACCA or ACA for endorsement. What has CIMA done to change this situation, and what can they and we as members do about this?
Answer
CIMA's Professional Standards department often writes to the gradually reducing group of mortgage lenders seeking their confirmation that they will in future accept financial references from chartered management accountants.
It is important to CIMA and particularly to members in practice that the pressure for recognition is maintained. You should note that this recognition will normally only apply to domestic mortgage applications by clients who are self employed, or are unincorporated bodies, where the advance required is less than 75% of the property valuation.
In an era when the UK government states that it wishes to reduce the red tape'for small business, and when it has made provision in the companies act for companies with an annual turnover of less than GBP5.6 million, it seems bureaucratic for lenders to demand audited accounts, or that an auditor (as opposed to an accountant) should give an opinion.
Feedback from CIMA members in practice on their dealings with mortgage lenders highlights the importance of checking with the head office of the lender if a reference is rejected at local level. An individual branch may have used its own operating procedures which either may not be in line with overall policy, or may be out of date.
Sometimes, a subsidiary lender may not be subject to the lending policies of a parent company. If the subsidiary's policies do not coincide with those of the parent company, they may be persuaded to reconsider their position and accept your reference.
In general, the majority of clearing banks in the United Kingdom will accept financial references from CIMA members without question.
Exceptions appear to include Abbey and Northern Rock.
Building societies are also broadly accepting of CIMA references, but the Skipton is among those which do not currently recognise the CIMA qualification. The Britannia and the Yorkshire Building Societies have recently (2008) decided to recognise CIMA members for the purpose of providing accountants' reports.
Please keep CIMA informed of any change to this situation of which you might become aware - either banks or building societies refusing references or those banks or building societies listed now accepting them.
You should also be keenly aware that mortgage applications offer substantial opportunities for fraud; always ensure that you have intimate knowledge of a client's income and expenditure before you sign any mortgage application on his or her behalf.
Failure to check carefully could result in your own appearance before a court, charged with aiding money laundering, and possibly receiving a custodial sentence.
CIMA Professional Standards is happy to take forward your complaints and suggestions; please email prof.standards@cimaglobal.com with as much detail as you can provide.