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FSA defends fast-track ban

The FSA says fast-track mortgages would just become “self-cert by another name” if  the regulator decided to allow lenders to offer a fast-track service.

Speaking at the Building Societies Association annual mortgage seminar this week FSA mortgage policy manager Lynda Blackwell said that self-cert mortgages have been largely withdrawn from the market in the wake of the credit crunch.

Blackwell said: “So what’s wrong with fast-track? We are well aware that lenders’ fast-tracking processes can be ‘gamed’ by brokers who know the rules and who know where to place cases where they don’t want to provide evidence of income.

“And with the demise of self-cert, the point of least resistance becomes fast-track. Fast track would simply develop into self-cert by another name. We read the mortgage blogs and have seen many brokers comment on how easy and open to abuse the fast track process is.”

The FSA has proposed to introduce income verification on all mortgages as part of its mortgage market review, effectively banning self-cert and fast track.

Blackwell says that 15 per cent of all mortgage applications in 2007 above 95 per cent loan-to-value were non-income verified. Blackwell says non-income verified mortgages continue in the form of fast-track, with fast-track accounting for 43 per cent of all mortgages sold in Q1 this year.

She adds: “If we leave fast tracking as it is, there will be a natural relaxation of criteria, as we saw in the past.

“As we have seen, memories are short, particularly when the good times start to roll. And we are not just concerned about the near future: we are concerned about putting in place standards that will endure across the economic cycle.”

Blackwell also criticised the Council of Mortgage Lenders for its claim that had the MMR proposals been in place between 2005 and 2009 around half of the mortgages advanced would not potentially not have been granted.

She said the trade body was “premature” to make such judgements before the rules had been finalised.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. It is my understanding that even if you go with a Fast Track mortgage it is the mortgage broker/IFA’s responsiblity to have evidence of income on the client file.

    The lender can and does check for this.

    But of course not everyone will follow the rules!

  2. Firstly, I am so glad that Lynda and her FSA colleagues read all the mortgage blogs.
    I for one would not want to waste my time knowing they did not! However, dare I suggest that they –The FSA- only take note of things that they want to not the things we wish they would do!
    As for self cert, I think most of us know we have lost that one, even though there arguably is a place for it in the right circumstances. Too much abuse of the system including lender encouragement has killed it. Also, Lynda is right on the self cert by any other name bit with fast track as I and many others pointed this out years ago, but the FSA did nothing! However, how fast track is managed is open to debate. After all (95 maybe 98? per cent) of advisers will have collected all the information regarding a client’s income, copies of salary slips, expenditure details and all so it presents little difficulty for the adviser to give this information to the lender. The real problem lies with the lenders to agree with the FSA how they actually square the circle evidencing everything.
    The FSA has been a poor regulator and in its last few months will continue I am sure to throw its weight around, much as a dying swan, in it’s quest to push through at all costs (even if it reduces consumer choice and advice) the RDR – and the MMR in it’s present shape
    BUT… whilst I do not disagree with many of the objects of the MMR or RDR for that matter, it is the devil in the detail that is the problem and the FSA’s lack of understanding of markets. You cannot legislate from the Ivory Tower, without getting your hands dirty on the floor and when you get the FSA director of conduct policy Sheila Nicoll agreeing with Treasury financial secretary Mark Hoban’s view that advisers must raise their qualification above a diploma in shift management at McDonald’s, then the FSA is being very provocative and taking head on advisers in the financial services market and showing no respect for their ability or professionalism. It is insulting beyond all belief, ignorant and plain wrong for the FSA’s top people to talk about advisers in such derogatory tones!
    Lynda – you mean well I know and want to do the right thing, but the principle and practicalities of what is in the MMR go well over the top of having a free, fair and of course transparent market in which the public will still be able to find good independent advice.

  3. Glad to hear that the FSA read these blogs – Please read this:

    In drafting your views on responsible lending what account have you taken of human rights – mine and everyone elses – to try to buy my own home?

    What right do you have to tell me I can’t forgo holidays etc to buy it (draft of your expenditure calculator takes items such as holidays for granted) or take the risk that if it all goes pear shape I will lose the house and any money I have sunk into it?

    My answer is none whatsoever.

    I have the right to decide if I am willing to take that risk and you should not have the right to determine for me that lenders will not be allowed to grant me that loan if they are willing to take the risk too. It is both a commercial decision and an inalienable right

    What sort of state are we becoming? Where is the freedom of rights that the British are supposed to enjoy?

    Are you going to insist the government takes steps to require bookmakers to check the affordability of gamblers before accepting a bet in case they spend the housekeeping money?

    Are you going to ban buying a car on HP because there is an immediate loss of value and you may not be able to afford to run it if petrol prices and car tax goes up?

    Are you going to ban non-guaranteed pension investments in case people can’t afford to live in retirement?

    It’s about time the FSA people get real and understand the facts of life for real people.

    We want to be able to make our own choices and decide our level of risks for ourselves. We don’t want some do-gooder to determine for us what we can and can’t do with regard to our ability to get on and stay on the housing market.

    Now go away and think again and come up with some more sensible rules.

    All you are going to do is drive the property market into the hands of the rich who will continue to snap up property as the only ones who can afford to do so and push the first time buyers and lower income earners into having to rent – condemning generations of people to be dis-enfranchised.

    Maybe its a plot. After all the FSA pay so well no doubt you all have property portfolios so it will work well for you.

    Would be great if the FSA actually respond to this post – but not holding my breath!

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