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FSA accused of weakness over exit fee debacle

Exit fees have remained the hot topic in the mortgage world with the FSA’s deadline of July 31 passing earlier this week. But you may be forgiven if you feel the deadline has been something of an anti-climax.

On Wednesday, the day after the official deadline, the FSA put out a statement on MEAFs which many commentators had believed would be highly critical of those lenders who had failed to scrap their exit fee or reduce it significantly.

But they couldn’t have been more wrong. Money Marketing had learnt on Tuesday that the report would not rap mortgage lenders that have failed to cut exit fees, rather it would be more of an analysis on what lenders have chosen to do.

So what has been the point of the review if those lenders charging extremely high exit fees can continue to do so? Of course the regulator has done well by making sure that lenders cannot unfairly change the fee during the course of a contract – the market clearly applauds and welcomes this move (well perhaps apart from those lenders who now have lost another bit of income…). But the point still remains that with the average cost of exiting a mortgage at £35 – are those lenders that charge £295 treating customers fairly?

Whilst lenders like HBOS, Northern Rock, Standard Life Bank and Cheltenham and Gloucester have received good press over their decision to axe their exit fees, one wonders how long this good press will last once arrangement fees start being increased.

Anti-MEAF campaigner The Mortgage Practitioner sole practitioner Danny Lovey was quick to express his dissatisfaction with the FSA’s report on exit fees. He says that the statement by the FSA will rank as one of the most ‘pathetic’ in history and only goes to show why the market has little faith in the regulator.

Lovey adds: “The lenders who have clearly not taken the FSA’s guidance seriously and either retained their excessive MEAFS or tried to hoodwink the public in changing the name of the administration fee, should now incur the wrath of the market.”

Whilst the regulator has appeared soft in this case it come down hard this week on three mortgage brokers for management failings, fining two firms £10,500 each.

Lawrence Scoffield Mortgages Limited and Council Homebuyers (Midlands and North) Limited were both fined £10,500, whilst Mortgage Network Solutions has been given a public censure.

Both LSML and CHL failed to exercise adequate management and control over their sales processes and MNS failed to make and retain proper records relating to its customers’ needs and circumstances and to keep adequate records of its Training and Competence procedures.

Lastly, CML stats have shown that the number of repossessions in the first half of this year rose to 14,000, a 30 per cent increase compared to the same period in 2006.

This is apparently 18 per cent higher than the December figure and around 1 in every 840 mortgages ended up being repossessed in the year to June. The number of mortgages in arrears at the end of June rose to 125,100, up 4 per cent from the December figure but down 3 per cent compared to June last year.

The CML suggests that the sharp rise in repossessions compared to arrears over the past two years is likely to be a result of an increasing amount of sub-prime lending within the overall market.

But IMLA executive director Peter Williams says that the figures are still exceedingly low by historic standards.

He says: “If we compare the number of mortgages 12 months or more in arrears with the same period of 1993, we find it is almost 11 times lower. Arrears have been fairly steady for the past few years and this tick-up takes arrears up to 2002 levels and possessions up to H2 1999 levels – a world away from the problems of the early 1990s. While any increase is unwelcome by both lenders and borrowers we do need to keep this in perspective.”


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