The U.K. government last week announced a draft law for the introduction of home information packs that could lead to increased risk in the housing market for buyers and lenders as well as investors in RMBS deals, reported analysts at Fitch Ratings.
The packs are intended to speed up the home-buying process by providing a package of legal inquiries including local authority searches, title documents, a draft contract and a home condition report but not valuations. Buyers however are still responsible for valuations for mortgages on top of the new costs of the packs. Fitch is concerned that, in an effort to keep extra home purchase costs to a minimum, lenders will be faced with the pressure to reduce costs of the valuation process. The market already suffers from some degree of "drive-by valuations" with some lenders using automated valuation models backed by databases of sale prices and previous valuations to give an appraisal on the nearest comparables, but these are typically executed for less risky mortgages and under extensive testing.