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Mortgage Edge

Mortgage EDGE: RICHARD ARDRONUp until a couple of weeks ago, the acronym KFI did not mean much to most of the broker community.

However, since M-Day, it has become increasingly synonymous with confusion and lack of clarity and while we are all quick to blame the lenders and sourcing systems, who I believe do shoulder a fair bit of the responsibility, I also think that this whole episode has highlighted inadequacies with many brokers in their ability to cope with IT-based systems.

Brought in as part of the new rules by the FSA, the key facts information sheet was designed to create a level playing field for all lenders and brokers, allowing customers the facility to quickly and easily make comparisons between different deals.

However, because the FSA did not make the KFI prescriptive, big parts of the contents have been open to interpretation and has subsequently spawned many varied varieties ranging from three pages long to 13 pages long in one instance.

I do not know why this is a surprise as it has happened before. When regulation came in on the inv-estment side of our industry, there was widespread variation and abuse of the fact-find, for example, as well as the KFI equivalent on the investment side called a key features document, and it was some time before this all settled down.

I know the Association of Mortgage Intermediaries sees this as a major problem and it has been in urgent talks with the FSA to find a solution to this confusing state of affairs brought about because there is no standardisation of KFI and a result has received a lot of feedback from members.

It does not help when there are discrepancies between the sourcing system KFI and the lender KFI, that is, of course assuming that you can get access to the lender KFI as even this has been a real challenge, with many len-der extranet sites making the job of producing what should be a simple compliant KFI very complex and often falling over because of the sheer weight of traffic.

I also believe that many lenders have gone over the top in their risk assessment which has resulted in lots of unnecessary hurdles being erected in the name of compliance.

I think many brokers should take some of the responsibility as well because what a lot of this has highlighted is the level of IT incompetence within the broker community, with many lenders and indeed the sourcing systems making assumptions about broker ability when putting these sites tog-ether that have simply been widely optimistic.

After all, if you put rubbish in, you get rubbish out, no matter how good the functionality of the KFI is, and whether it is because of lack of understanding or lack of ability, many brokers are inputting inaccurate data, thus creating inaccurate KFIs.

I will also take a swipe at the sourcing systems here, as they have adop-ted, in many respects, a nanny state approach when putting the KFI functionality together.

For example, if you try to produce a KFI in any other way than via the new or existing client entry route (thus demonstrating that you have gone via the fact-find), then the final KFI has a big disclaimer across the top announcing that this is non-compliant and must not be given to the customer – very helpful.

Then there is the insistence that the final output for the whole KFI should be produced as a PDF document principally to avoid tampering. Well, I find this a little insulting.

We are after all taking the responsibility for the advice and the sourcing systems as they constantly remind us are not taking any responsibility for the accuracy of the data so aside from maybe locking down a handful of the calculations, why can’t we have an editable document?All this could have been avoided had the FSA been more prescriptive in its approach to what the KFI needed to contain but one thing is for certain, it is going to be a long winter.

Kevin Paterson is managing director of Park Row Independent MortgagesIf the predicted pre-M-Day rush did not quite materialise, the aftermath has certainly made up for it. Advisers now wanting to conduct business under the new regulation are frantically sear-ching for a suitable organisation to joinHow many times are we told – to fail to prepare is to prepare to fail? So why is it that not until October 31 did many in the industry start to put plans into place after ignoring the 18 months of warning signs?Without harping on about the already exhau-sted subject of the teeth-ing problems of M-Day too much, we need to look at who has and has not put the building blocks in place, what advisers need to do and what the future of mortgage advice looks like.

To be fair to the mortgage sourcing companies, they are rectifying the problems experienced at M-Day and change always brings challenges – not least to the adviser. On the len-der front, many advisers have experienced a lack of communication as the unknown unfolds and in many of these situations, networks and support services have been the go-between.

Lenders, networks and the FSA have all spent the last 18 months or so ensuring that the right messages were communicated in the run-up to M-day, yet inevitably, after October 31, there were teething problems for an industry waking up to a new era of regulation.

Leading up to Oct-ober, we saw an influx of new companies throwing their hat into the arena hoping to capitalise on the opportunities that a newly regulated environment would offer them. However, with M-Day very much alive and kicking, the same cannot be said for many of these new entrants.

It appears that the old saying, survival of the fittest, has never been more appropriate, as many new firms and ind-eed advisers are finding that they simply do not have the infrastructure in place to cope with the burdens that accompany regulation and without being too bold, it is fair to say that only three or four will be left standing once the dust has settled.

So, what of M-Day and the inevitable teething problems? Indeed, there have been a number of reports of advisers finding it difficult to register in this new regime and indeed to actually conduct business but to further reiterate what has just been written, this seems to fall outside the bigger support groups which have been preparing for regulation for almost 20 years.

If the predicted preM-Day rush did not quite materialise, the aftermath has certainly made up for it. Advisers now wanting to conduct business under the new regulation are frantically searching for a suitable organisation to join and to take away their regulatory hangovers. The main problems seem to have hinged on registration, not the sales process.

LifeTime Mortgage Insurance Experts Mort-gage introducer Gary Hanley says: “Other than the usual problems since regulation, that have been well documented, that is, some lenders not being ready to produce KFIs and slight problems with registrations with lenders, I have found the sales process to be very smooth.

“I am a member of a major network and to help me in the build-up to regulation, they provided me with nine regulation factsheets which covered everything from disclosure through to the T&C scheme. Also incorporated within these factsheets were test sections which helped understanding of each section.

“My supervisor within the network also perfor-med a role play on the new procedure to make sure that I was fully compliant. So far, my clients say they are very happy with the new forms and they like the KFI as it lays out in plain English the ins and outs of the mortgage that I am recommending.”

Regulation is about improving customer relations and with this comes even greater opportunities for advisers but what is rapidly becoming evident is that to capitalise on these opportunities, you need someone else to take care of regulation – which brings us full circle once more.

Richard Ardron is group marketing and communications manager of Tenet Group

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