Adverse Credit Policy
This Adverse Credit Policy is intended to guide City of York Council and its officers for the allocation of a shared ownership home to a prospective customer.
The Adverse Credit Policy applies to all prospective customers, both using a mortgage and those purchasing with cash savings.
This policy ensures that shared ownership homes are only sold when the purchase and ongoing home ownership costs are affordable and sustainable for the customer. Where adverse credit is concerned, we need to ensure we are protecting both the customer and City of York Council.
Some discretion may need to be applied to this policy, for example: where customers may have experienced circumstances beyond their control, and City of York Council may need to make a judgement call based on their personal situation.
Terms and definitions in this policy:
- Adverse Credit: Is a track record of poor repayment history on one or more loans, credit cards, or where there are other financial considerations that put a customer at a higher risk for lenders.
- Applicant: any person who applies to buy a shared ownership property sold/part-owned by City of York Council.
- Customer: any person who is interested in shared ownership properties sold/part-owned by City of York Council.
- Financial assessment: an independent review of applicant finances undertaken by a qualified panel approved Financial Advisor.
Policy statement
A history of adverse credit may result in the customer not being able to proceed with their application.
Where there is a low-level adverse credit, and a mortgage can be secured with a mainstream lender, this level of adverse credit is unlikely to affect them.
In the case of higher adverse credit, and they are unable to source a mortgage through a mainstream lender, it is unlikely they will be able to proceed with their application.
All applications will be assessed by an Independent City of York Council approved panel Financial Advisor who will be guided by City of York Council’s shared ownership policies.
City of York Council reserves the right to refuse mortgages from lenders offering interest rates more than 3% above the base rate.
This table outlines examples of adverse credit and what impact it could have on the customer’s financial assessment.
| Type of adverse credit | Potential impact on customer’s financial assessment |
|---|---|
| Missed mortgage / rent arrears | If missed mortgage/rent arrears happened in the last 12 months, it won’t usually be accepted. We may however consider the situation through an Individual Assessment |
| Unsecured arrears | None in the last 36 months. They must be satisfied prior to the mortgage application. |
| County Court Judgments (CCJ) or registered defaults | All CCJs/defaults registered more than three years ago and satisfied prior to mortgage application. All CCJs/defaults were satisfied more than 12 months prior to application regardless of date of registration. The CCJs/defaults in aggregate amount to less than £300, regardless of date of registration, and were satisfied prior to mortgage application. |
| Individual voluntary arrangement (IVA) and discharged bankrupts | IVA/bankrupts which have been discharged over 3 years ago, and who have no residual debt may be accepted subject to Individual Assessment. |
| Repossessions | Not acceptable, unable to proceed with application. |
| Debt management | Each plan will be reviewed individually, considering the repayment period and affordability |
Roles and responsibilities
City of York Council Officers will be responsible for ensuring this policy is followed and applied to all prospective customers of shared ownership, for both new sales and resales.
Key points for customers
There may be circumstances where the above applies but there are extenuating circumstances, we will take these into account. The overall decision will depend the level of risk to the customer and City of York Council.
Key points for colleagues
In a situation where a customer has adverse credit and comes to City of York Council from the financial advisor, the decision should be discussed and agreed with the Customer Care Team at Shape Homes.
Key points for executive City of York Council
This policy ensures that we process applications in an impartial and consistent manner and adheres to the affordability guidance outlined in the Homes England Capital Funding Guide( effective from the 1 of August 2024).
This policy is intended to support affordability and sustainability for the customer and City of York Council.
Policy updates
The Customer Care Team, Shape Homes York, City of York Council will be responsible for updating this policy and will review this policy on a yearly basis.