Coronavirus - Income criteria changes

In this section we cover:

We’ve had to make some temporary changes to our lending criteria, designed to protect our members and ensure we lend responsibly. We’ll keep them under review and will make changes when it’s appropriate to do so.

Coronavirus Job Retention Scheme – Employed Applicants

Following the Government’s announcement on the Coronavirus Job Retention Scheme for Employed workers, we’re outlining what this means if your clients have been furloughed.

If your client has a shareholding in the business they work for, and provided their share is less than or equal to 20%, any income payable under PAYE may also follow this.

What is the scheme?

This scheme provides a grant to UK employers to enable them to continue paying part of their employees’ salary to PAYE employees that would otherwise have been made redundant.

To claim, employers must designate affected employees as ‘furloughed’ and notify employees of this change. The employee remains employed by their company while furloughed but can’t undertake work for them.

The employers will be given 80% of furloughed employees wage costs, up to a cap of £2,500pm (£30k per annum). The employer can opt to fund the difference between the payment and the employee’s salary but is not obliged to do so.

For example:

  • An applicant earning £22,000pa (£1,833pm) gross will receive the equivalent of £17,600pa (£1,467pm).
  • An applicant earning £60,000pa (£5,000pm) gross will receive the equivalent of £30,000pa (£2,500pm).

Criteria

If your client is employed and has been furloughed, we may accept the application, subject to the following:

  • We’ll accept 80% of their basic income up to a maximum of £2,500 pm (£30k per annum gross)
  • Bonus, overtime or commission are unacceptable
  • Any additional income is unacceptable e.g. shift/car/location (such as London Weighting)/TLR allowances.

For any cases where the employer will be funding all or part of the difference between the basic income and the furlough payment, you'll need to obtain written confirmation via letter or verified email from the employer, including the amount payable whilst under furlough and how long this will continue for.

If the employer notifies you that the top up payment is unlikely to continue until the employee returns to work, or they confirm the top up payment is a loan, please contact your BDM.

Pipeline applications - pre or post offer

If a client informs you that they have been furloughed, you'll need to call us to let us know how much income they'll receive, and how this is broken down. Please remember the maximum furloughed income is £30,000 per year. In most cases, the latest payslip showing the level of furloughed income will be required, but further information may also be requested.

If using the lower income means your client fails affordability, they can choose to reduce the loan amount, extend their term (subject to criteria) or pause their application. 

If the application fails affordability following a reduction in income, and your customer is moving home and has already exchanged contracts, please speak to your BDM.

New applications

When submitting your client’s application, you should key the furloughed income. When providing proofs, you should upload a document to the payslip requirement, to confirm your client has been furloughed and how much they’ll receive, along with the most recent payslip.

If using the lower income means your client fails affordability, they can choose to reduce the loan amount, extend their term (subject to criteria) or pause their application.

Clients that are returning to work

If your client has already returned to work after being furloughed, or has been notified of a return to work date, but the latest payslip doesn’t show the full return to work income, some additional proofs should be provided:

1. Latest payslip showing furlough or part furlough/part basic income, and

2. Pre–furlough payslip, dated no earlier than February 2020, and

3. Return to work letter issued by the employer to the employee confirming:

  • the applicant has returned to work or the date they will be returning to work, and
  • the applicant’s terms and conditions have not changed, and
  • they will be returning on at least their pre-furlough income - if lower they should confirm the basic salary plus any shift/location/car allowances.
  • the basic salary plus any shift/location/car allowances.

For new applications - The return to work date must be no more than 4 weeks from the application submission date.

For pipeline applications - The return to work date must be no more than 4 weeks from the date you notify us of the change.

If the applicant is returning to work and is getting a future payrise which you wish to include for affordability purposes, please refer to your BDM.

Self employed income

From 1 May, all applications where there is any element of self employed income will be fully underwritten, receiving an individually tailored underwriting decision.

The process for these applications:

  • Submit a Decision in Principle – the outcome will either be ‘Refer’ or ‘Decline’
  • If the case is a ‘Refer’, you’ll receive a ‘Subjective Accept’ decision via email within 24 hours. At this point the application won’t have been reviewed, but will confirm the requirements needed on the case when you submit a Full Mortgage Application (FMA).
  • In addition to the requested documents you’ll be asked three questions in relation to the application:
    • What business sector does the applicant(s) work within?
    • What impact has Covid-19 restrictions had on the applicant(s) business and what adaptations (if any) have they made?
    • What government support (if any) have the applicants applied for or received from the government? Please provide evidence of any payment received.
  • When you are ready to submit the FMA, you’ll need to attach all the requested documents, along with the answers to the three questions above.
  • If there’s any additional requirements needed, these will be requested once the case has been reviewed

Bounce Back Loans

If your client has taken a Bounce Back loan, we’ll consider these cases. If you’re asked for evidence in relation to these please provide the following:

  • Upload an additional document to the case via NFI Online labelled ‘COVID-19 Business Loan’. This document should detail if it’s a Bounce Back or Business Interruption loan, the amount of the loan, the monthly payment* and whether the loan will be secured against the proposed security address or not. It should also state whether the Lender is seeking a personal guarantee. *For Bounce Back loans a payment will become due after the initial 12-month period of the loan, the payment amount must still be provided.

The loan should not be keyed as an outgoing on the application.

Pipeline applications - pre or post offer

The changes outlined above apply to all cases started on or after 1 May 2020.

From 30 July, the changes will also be applied to any reprocesses on cases started before 1 May.

Bonus, Overtime and Commission (BOC) income

From 2 April 2020, we won’t accept BOC income on any new applications. This also applies to any additional income that we currently treat the same as BOC.

If anything is keyed to the BOC fields it won’t be used in our affordability assessment. A proof requirement will still be generated but please ignore this.

If your client is a key worker and their income has been unaffected by recent developments around Coronavirus (COVID-19), then we can consider using overtime income. This is subject to us being satisfied that it is sustainable. Individual cases should be appealed via your BDM.

Pipeline applications - pre or post offer

The changes outlined above apply to all cases started on or after 2 April 2020.

From 2 July, the changes will also be applied to any reprocesses on cases started before 2 April.

Zero hour contract (ZHC) income

For all cases from 2 April 2020, we’ll now only accept ZHC income from:

  • NHS Bank Nurses and Locums
  • Non-NHS Bank Nurses
  • Care Home workers
  • Supermarket workers (including delivery drivers)

We’ll still accept income from Retained/On-Call Firefighters and Armed Forces Reservists which should continue to be assessed using the ZHC income criteria.

We’ll still require the applicant to have been employed on this basis for at least 12 months, but we have removed the ‘same employer’ requirement.

We won’t accept ZHC income from any other roles – if you consider an applicant outside of this to be a designated key worker in the COVID-19 response and they meet the criteria, please contact us.

The following continues to apply:

  1. Income from the above is only acceptable where it's not the primary income i.e. there must be another employed/self-employed/pension income, which is higher, it doesn’t have to be a second job.
  2. The applicant must have been employed on this basis for at least 12 months.
  3. The latest P60 and most recent payslip are required to calculate the income.
  4. The income should be the lower of the latest P60 total or the most recent payslip year to date annualised.
  5. Bonus, Overtime or Commission must not be used.

Pipeline applications - pre or post offer 

The changes above don’t apply to cases started before 2 April 2020. They only apply to all cases started on or after 2 April 2020.

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