FSA hits back at CML over MMR claims

22 October 2010 0:00 am | Updated: 22 October 2010 1:44 pm | By Natalie Holt

The FSA has criticised the Council of Mortgage Lenders for making “premature” judgements about the impact of its mortgage market review proposals.

Earlier this month the CML claimed that had the MMR proposals been in place between 2005 and 2009 around 3.8m mortgages would not potentially not have been granted, equating to over half of the mortgages advanced over the period.

The trade body argued that mortgages would have been disallowed even though borrowers have not had any payment difficulties.

But in a speech at the Building Societies Association annual mortgage seminar this week  FSA mortgage policy manager Lynda Blackwell said it was too early to judge the effect the MMR proposals will have.

She said: “The biggest controversy though, has been about the impact of our proposals on the market, with the suggestion that if the affordability proposals in the paper were implemented, around half of all mortgages taken out between 2005 and 2009 - which apparently have shown no signs of payment difficulty – would not have been granted.

“Frankly, a number of assumptions about the final MMR policy requirements have been made in making that assessment. We have not decided on our firm policy proposals and so it is a bit premature to be judging the outcome.”

Blackwell argues that it is not right to assume that if a mortgage is affected by the proposals it would not have been granted.

She adds: “In most cases the impact would be a change in the terms of the mortgage available, for example a higher deposit or higher repayment levels, and not the refusal of any mortgage at all.”

Blackwell also quoted the FSA’s own analysis suggesting 46 per cent of borrowers are under pressure due to their financial commitments and outgoings in relation to their income.

She says the proposed affordability rules, which would require proof of income for every mortgage and tougher affordability checks for riskier applicants, could have gone much further through measures such as LTV caps but these were decided against in the interest of the consumer.

The income verification requirement would effectively mean a ban on self-cert and fast-track mortgages.

Blackwell added that with the demise of the self-cert market if fast-track were to remain available it would just become “self-cert by another name.”

 

 

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