The FSA’s latest consultation paper, CP10/ 28 – mortgage market review of distribution and disclosure, considers various aspects of mortgage regulation and proposes how to correct perceived failings in regulatory controls and current market practice. The proposals will impact on lending, advising and the consumer experience.
We know from previous proposals that lenders must adopt a more responsible approach to their lending, with strict affordability testing on all proposals. In addition, all mortgage sellers will now be required to ensure that the selected product is appropriate for clients’ needs.
The execution-only option will disappear from the distribution model as a result. One of the questions to be answered is that while it is widely accepted that many buyers do not understand the difference between an advised and a non-advised sale, will the proposals provide greater clarity? Will the new disclosure proposals lead to better consumer understanding or will the affordability tests drive those providers who offer non-advised sales into a purely advised regime?
The proposals do not suggest any requirement for a higher level of qualification but all sellers, not just advisers, must now be qualified. The regulator is not seeking to impose enhanced continuing professional development requirements, similar to its retail distribution review proposals, but will continue to promote CPD as best practice for mortgage practitioners.
However, it must be remembered that there is an over-riding requirement for all relevant staff to maintain the necessary skills and knowledge required for their role and to be able to demon-strate this is the case. Firms would be wise to have a formal process by which they can prove they are meeting these requirements.
It has been recently announced that because of a need to reprioritise within the FSA, the introduction of the approved persons regime across the mortgage sector is being delayed beyond the planned date of March 2011. It is to be hoped this action will not leave consumers vulnerable to the mischief the measure was supposed to prevent and that they are protected in the meantime.
Recognising that equity-release and home-purchase schemes are not part of the mainstream mortgage market, the FSA has acknowledged that the current controls are in need of review. But while no proposals are being made at this time, the FSA is asking for the views of stakeholders to help it formulate future proposals.
The mortgage market has an excellent record for meeting the needs of consumers. While it is recognised there are some areas of difficulty, most would be concerned if access to homeownership were restricted significantly. Consumers want a market that provides for their needs and is properly controlled.
If you have a view on these proposals and on their effect, take advantage of the opportunity to comment to the FSA before the closing date of February 25.
Richard Fox is chief executive of the Chartered Insurance Institute’s Society of Mortgage Professionals