We are now eight months away from what will probably be the largest seismic shift in mortgage regulation ever.
Many saw M-Day in 2004 as a water-shed, but it introduced a set of rules and documents which has been built on and gradually enhanced by stricter policies and increasing application of the wider FSA rule-book.
The banning of over 130 small brokers after the problems of 2008 was the natural consequence of the light touch applied to what is the single most important financial transaction in life. Incurring a loan of what is often more than eight times the net annual take home pay of most people and likely to be with them for the majority of their adult life, is not an inconsequential action.
There are many aspects of the mortgage market review that signal no change for the market we are in today, but the new rules from April 26, 2014 do deliver a significant shift from where we were in 2007.
The new FCA is driving considerable resources at ensuring all parties are making plans to be ready on time. For lenders, there are changes to the key facts illustration and lots of work to migrate from non-advised processes to qualified competent staff capable of providing advice.
Advisers will have to demonstrate suitability against at least nine key criteria set out in the MMR rules. Lenders will have to evidence income and affordability to meet the new more exacting standards.
Intermediaries will have to become expert in the criteria of the lenders they work with so that they only make applications that meet those. Record keeping will have to step up another gear and lenders are likely to want to see more from brokers to be satisfied that they are doing the job to the expected standards.
It is likely that given the current approach to supervision, lenders will take a very conservative view for next April, so that they will be able to relax if and when they achieve some certainty over how the new rules will be interpreted.
At the Association of Mortgage Intermediaries, we are confident that the vast majority of brokers already do what is required under the new rules. There will need to be some work on how this is evidenced and presented to the lenders. Lenders themselves with their more linear IT systems and processes, which avoid being able to skip steps, may find consumers unhappy with this regimented approach.
One particular difficulty is that our lender partners are neither ready to share what their requirements might be, nor agreed on how much of their policy criteria they might publish in an accessible, single, easily understood document. It is unlikely that the majority will be ready before the end of this year. This will mean that broker firms will have a busy first quarter next year in meetings with their lender partners being trained on the new ways of working.
AMI, the Intermediary Mortgage Lenders Association and the Council of Mortgage Lenders will be working together to see how much we can co-ordinate this to reduce duplication and confusion, and to establish common ground that we can explain to the market next year so that it is fresh in peoples’ minds.
Leaders of firms need to plan for the training and assessment of their advisers’ understanding of the changes in March and April next year.
Robert Sinclair is chief executive at the Association of Mortgage Intermediaries