The Council of Mortgage Lenders believes making advice compulsory for arrears handling could have a major impact for third party servicers.
In its submission to the final mortgage market review consultation paper, the trade body says it could lead to third party servicers seeking permissions for advice.
It states: “This will have a significant impact on third party administrators working on behalf of lenders, whose models are based on offering a non-advised service, and most third party administrators do not have the necessary permissions to provide advice.”
The CML believes most forbearance options are based on temporary changes and concessions, and not formal contract variations.
It states: “A lender would not be certain of the outcome at the start of the conversation and would have to progress on an advised basis.
“This will result in a significant cost to lenders to amend their systems, train their staff in an advised process, much of which will be irrelevant to their vital function.
“There will be additional costs – not factored into the FSA’s cost benefit analysis – because advisers are on higher pay rates than non-advised sales staff.”
It is also calling for any changes in advice rules in the MMR to be aligned with the introduction of the approved persons register.
It believes this would create a consistency of approach and significantly reduce the costs to lenders and third party administrators.
The CML says an alignment would also ensure borrowers are not subjected to a disproportionate process when making changes to their existing mortgage contract which they will expect to be straight forward and swift.