The Council of Mortgage Lenders has joined the growing clamour for statutory mortgage regulation.
The seeming change of heart comes only weeks after a covert nationwide survey by trading standards officials found mortgages are being systematically missold leaving thousands of home owners with poor value deals.
The CML, up to now staunch a supporter of self-regulation, says statutory regulation should replace its voluntary code of practice rather than supplement it.
IFAs, consumer groups and MPs have been waging an increasingly vocal campaign for statutory regulation of mortgages by the FSA, claiming the CML's voluntary code of practice is failing.
But the CML insists self-regulation has not failed.
It argues the consultation process is "a golden opportunity" to simplify and streamline mortgage sales guidelines. The Consumer Credit Act, the Mortgage Code, and the Non-Status Lending Guidelines all impact on mortgage sales processes.
The CML says a statutory framework under the auspices of the FSA will provide greater market confidence, and ensure a level playing field by making a single set of rules compulsory for all lenders and intermediaries.
It says statutory regulation will guarantee consumers a one-stop shop for financial services and mortgage queries.
But it says buy-to-let and commercial loans should not be brought under the FSA because regulation should be tailored to protect residential owner-occupiers.
While most of the industry believes some form of statutory regulation is inevitable, it is unlikely to be in force for another two years.
CML spokeswoman Sue Anderson says: "We have had to be persuaded that there is a need for change.
"What we have been saying for some time is that statutory versus voluntary regulation is not the debate. The debate is the scope of regulation."
The Donnellsons Partnership partner Barry Williams says: "The cost of statutory regulation is one people are going to have to face. The code needs the weight of statutory regulation behind it."