Advisers must be prepared for MMR

28 July 2010 0:00 am | Updated: 28 July 2010 12:24 pm

With further releases from the regulator clarifying the impact of the mortgage market review and the final paper due in September, writing this piece gave me a feeling of déjà vu. I last wrote on this subject in November 2009 and said many of the areas being addressed should come as no surprise as they had been on the radar for some time. It is for this reason I am concerned, eight months on, that a number in the intermediary market are still appearing like rabbits caught in the headlights, as if this had not been signposted for the last two years.

For clarity, the fundamental changes the MMR paper will drive are as follows:
Individual registration is likely to be in situ by March 2011. This will mean registered individuals as well as firms be shown on the FSA register. For those that may be hiding under someone else’s FSA number and may have been previously terminated by a network or club, sorry, your time is up and the regulator will now monitor every individual seller. Having spoken to a number of network colleagues, this will not be a major challenge as most have registration to the network at individual level anyway, even where the writer appears under a firm.

Mortgages where proof of income is not required are not likely to exist, whether they are self-cert or fast track. The latter has caused considerable concern. To be fair to the lenders, they have insisted for some time that you must have proof on file and they have been auditing this on a regular basis, resulting in the withdrawal of the facility where this has not been provided within given timescales.
Again, everyone is being punished for the continuous misuse of self-cert by a few. For some time, Personal Touch Financial Services and other networks were coming under fire for carrying out 100 per cent file checks on this business. But if everyone had, maybe the FSA would not need to have gone this far.

Interest-only mortgage criteria is being tightened. The whole issue of repayment vehicles, mortgages into retirement, use of property sale to redeem mortgage, loan-to-values and forward planning is all coming under the microscope. Needless to say, organisations that have IFA status will see a big opportunity as those that do not cannot advise on repayment vehicles.

Finally, the impact of the affordability issue is less clear, mainly as responsibility for ensuring the mortgage is affordable to the clients will be held by lenders following MMR implementation. Many lenders have suggested they will have logistical problems in monitoring the process that every firm applies to give them comfort the consumer is being adequately vetted for affordability. Again, I can only talk for PTFS, but insisting we have bank statements on every file to check outgoings as well as income allows lenders to work with us to ensure we can provide them with the confidence on an area where they are ultimately responsible.

Several lenders are already looking at who they play with in the future and my advice is to be proactive so that you are ready for the changes today. Do not wait for them to happen as you may not have access to certain lenders by then.

Dev Malle is sales and marketing director at Personal Touch Financial Services

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