The new procedures, which come into effect on September 1, will ensure that the conveyancing and valuation processes capture the true value of the property, reducing risk for both borrowers and lenders.
HBF and Homes for Scotland, who were consulted by CML throughout the process, said: "The steps announced by the CML build upon the amendments introduced earlier this year by HBF and HfS to strengthen their Codes of Conduct, and underline the industry's commitment to transparency. These initiatives will ensure that housing developers maintain the confidence of mortgage lenders, and help facilitate the process of buying a new home."
Some lenders have been concerned that the valuation and conveyancing processes do not always capture discounts and other incentives that buyers may be able to negotiate with developers when purchasing newly-built property. This may mean that, in some instances, lenders might unintentionally offer a mortgage based on a valuation of a property that is higher than the true price paid for it.
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Lenders will require builders or developers of any newly built, converted or renovated property to complete a new 'disclosure of incentives' form. This will be reinforced in the CML's Lenders' Handbook, which sets out specific requirements for conveyancers acting on behalf of lenders in property transactions.
CML has been working with surveyors and house-builders to ensure that the valuation of new properties is more reliable and robust. In September, RICS will amends its guidance to members to reinforce the requirement to disclose incentives to lenders. The Home Builders' Federation and Homes for Scotland have recently reinforced their own codes of conduct to encourage greater transparency about discounts and other incentives. And a number of major builders are taking their own steps to address the issue.
CML's director general, Michael Coogan said: "We are introducing these measures to help sustain confidence in the market for newly-built property. Lenders need to know about discounts and other incentives so they can be sure that the decision to offer a mortgage is based on a reliable valuation of the property. The new measures will provide additional security and safeguards for borrowers, as well as lenders.
"We welcome the support of RICS and house-builders in implementing this solution. Responsible builders and developers understand that lenders must have confidence in the valuation process. They are supporting our initiative because they understand that, in making these changes, we will reinforce confidence in the new-build market."
(GK/JM)
