Good regulation and supervision should be all about “no surprises”. The industry should be aware of what is coming and respon-sible firms been given good briefings on what is expected of them.
Imagine the surprise for many when Lynda Blackwell, manager of mortgage policy at the FCA, spoke at Financial Services Expo a couple of weeks ago and set out the likely impacts of the new European Mortgage Directive. Most in the room were taken aback by the likely scale and reach of the changes being required should the directive be adopted by the European Parliament and Council before the end of the year.
When the FSA decided to push ahead with its Mortgage Market Review proposals in 2012, with implementation on 26 April, 2014, the surrounding communications gave a clear impression that these new rules were “directive-proof”.
It now looks as though the benefits of reduced written disclosures will be rolled back and having just completed rewrites to software to produce MMR-compliant KFIs, a whole new 18-month exercise will be needed to meet the directive’s requirements.
In addition, how we introduce binding offers and consideration periods into a process which is already cumbersome for the consumer will take much debate. This is without the complexities of new Annual Percentage Rate of Charge calculations and disclosure of a second version should any initial rate be for less than five years.
While we have no choice in implem-enting the spirit and letter of the directive, we did have choice on the MMR and the industry has the right to expect better.
If this is bad for the first mortgage world, the issues for those in the second charge industry are more complex. They face migration to FCA control from the OFT, into an interim regime, and no certainty about their conduct rules until the dust settles on any directive impacts.
Moving from the certainty of a statutory framework with tested case law to an unknown regulatory regime which is certain to change is not the kind of consistency that assists good firms to plan and grow at a time when the economy needs funding. By the same token, broker firms should have the same relationship with their lender partners. This “no surprises” approach should be there too.
I am becoming more concerned that a lender can question the quality of a firm’s business, remove them from panel and then mystically other lenders decide to with- draw them from panel.
Clearly, if there has been fraud which the broker could reasonably have known, then there is no argument. But too often recently I am seeing lenders adopt the Wheatley-esque shoot-first- ask-questions-after approach. And when later it is proved that there was reasonable doubt, I am concerned that the doors back to panel remain closed.
Once a broker has been removed and they honestly answer their regulator’s enquiry, this brings more enquiry, action and costs that the average broker cannot survive. Fraud is a bad thing and as an industry we must act with vigour to get rid of it but we need to remember intermediaries are paid to introduce business, not conduct lenders’ fraud checks.
Robert Sinclair is chief executive of the Association of Mortgage Intermediaries