Share
Mortgage View
Industry at the crossroads
With findings suggesting that 20 per cent of all fraud is now mortgage-related, headlines about enforcement and banning orders have proliferated recently and the mortgage market review has received less airtime.
However, this week will see the Association of Mortgage Intermediaries respond to the FSA’s original discussion paper and it is no exaggeration to say that the outcome will leave the mortgage industry at its most meaningful crossroads since October 2004.
My view is that much of the content of the MMR was satisfactory from an intermediary viewpoint and the regulator may be encouraged if this is the general tone of the AMI response. But, like many others, I am still concerned about whether there was a sufficient and relevant market failure analysis to justify certain conclusions. Nobody doubts that flaws in the system had developed in areas such as income verification and affordability measurements. But transferring shortcomings from the specialised sector to the mainstream may leave us using a sledgehammer to crack a straightforward nut.
But let’s deal with some areas of agreement first. These might include the individual registration of brokers, although that needs to be proportionate and not akin to that which exists in the investment world. I would also welcome collaboration on the stress-testing of affordability illustrations and retention of the initial disclosure document and an acceptance that not all kinds of sales advice can be fully advised, however much some colleagues shout about dual-pricing.
The real horse-trading, however, may occur in the following areas. First is help for the self-employed, who now number more than three million. Despite the stimulus that many self-employed jobs (especially manual ones) give to the economy, they are in danger of being discriminated against. We all accept that the term self-certification should be retired but all lenders should be free to satisfy themselves on affordability and sources of deposit using their own underwriting and scorecard approaches, especially if they are taking on greater responsibility for affordability and, more legitimately, pricing for risk.
Second, there is the old chestnut, “independent”. This has always been total nonsense and the MMR presents an opportunity to tidy it up once and for all. It hinges on the assessment of what is actually “fair and representative” but within a certain channel. This is wholly disingenuous because many distribution channels have narrowed severely in recent times as lenders have rationed their products to selected outlets and my fear is that in 24 months time this valuable term will still be subject to abuse and consumer misconception.
The backcloth to the MMR’s implementation will be the general election and a probable change of Government. I hope that much of the good work done by the consultation process will not go to waste. Ultimately, this process should be apolitical, as what we are seeking is appropriate regulation, not necessarily FSA regulation. There is a difference.
Kevin Duffy is managing director of Mortgageforce
