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Quality control

While regula-tion of the mortgage industry can in many ways be held up as a success story, anyone looking at the disciplinary actions being taken by the FSA must recognise that the current regime is not wholly effective and adjustments are necessary.

The key focus for the disciplinary committees has been sales practices but there is also evidence that there are issues about the way in which some products have been designed, playing too strongly on the elements of greed found in all individuals.

Borrowers who traditionally would have had little chance of making a cogent case have found it easy to find a willing lender. Intermediaries were tempted by the opportunity to earn fees, sometimes out of all relationship to the value of work undertaken from both borrowers and lenders, and lenders have used creative ways of maximising the value of their capital to increase the scope of their businesses and their potential earnings.

Now the bubble has burst and everyone in the market is shar-ing the pain as the necessary adjust-ments take place.

Setting it out like that does not describe the very real diffi-culties that many are experiencing, nor indeed does it anticipate the future. Economists are pred-icting three million unemployed, more people suffering negative equity, causing more repossessions, reducing the fluidity of the housing market and making it harder for people to move when the opportunity of fresh employment presents itself.

Given that the current system is at least partly broken, politicians and regul-ators are starting to focus on what can be done. Seemingly, more rules-based regulation is being touted as the way forward, linked to regulation of product (more central control).

Without trying to make a political point, these proposals are themselves already busted flushes. What we need is a way that will deliver the goods while at the same time not eliminate product and service delivery.

There is no easy answer. Looking at recent history, it is possible to identify that the ills were caused not by a failure of the system but by a failure of individuals to understand and take on board their responsibilities. What we have to do is to set out the personal qualities and standards required of all individuals and state clearly that significant action will be taken against those who do not reach those levels. People must recognise that they are part of a profession and that while they may enjoy benefits, they must also bear responsibilities.

The retail distribution review proposals include professional standards. Those in the mortgage arena should look at these proposals and consider being early adopters, thereby negating some of the proposals for more central control.

Richard Fox is chief executive of the Society of Mortgage Professionals

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