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£9M cost of FSA individual registration on mortgages

The mortgage industry faces a £9.4m bill following FSA proposals to regulate all individuals who advise on or sell mortgages, with annual costs of £1.6m.

This week, the FSA published its second mortgage market rev-iew consultation paper, which pro poses individual authorisation for brokers and more onerous arrears-handling rules for lenders.

The FSA wants the new auth- orisation requirement to apply to all individuals advising on or arranging, as an intermediary or a provider, a regulated mortgage contract, sale and rentback agreement, home-purchase plan or home-reversion plan.

Companies must also appoint someone to the compliance oversight function, CF10.

The FSA’s cost-benefit analysis says around 20,000 individ- uals will need to be regulated, incurring a one-off cost of £3.8m for the FSA and £8.9m for the industry. The cost to firms during the transition period will be £450 per individual who is not currently authorised. The one-off cost of introducing the CF10 function is estimated at £150,000 for the FSA and £500,000 for the industry.

Under new proposals on arrears’ handling, lenders must not add early repayment charges onto arrears charges and interest levied on those charges, and must not apply a monthly arrears charge where the firm and the customer have agreed an arrears repayment plan. Payments by customers in financial difficulties must first be allocated to clearing missed monthly payments rather than to arrears charges. Firms must record all arrear-handling phone calls and keep all records for three years.

These changes are expected to cost firms a one-off £590,000 and £1.65m in ongoing costs.

FSA head of mortgage policy Ed Harley says increased enforcement action in the mortgage sector is likely. He says: “Where we see behaviour that we do not think is consistent with our rules we will be looking to take action.”

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