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Sourcers try to get key facts straight

Three months after M-Day, how successful have mortgage sourcing systems been in dealing with key fact illustrations from over 100 UK lenders?

Charcol made the decision last October to get KFIs direct from lenders and not through its preferred sourcing system, Mortgage Brain. Senior technical manager Ray Boulger claims there is little evidence of progress being made on KFIs since October 31.

Lenders and brokers remember how M-Day brought systems crashing, incorrect commission calculations, missing products, problems with porting and the inability to provide KFIs for flexible products.

The Mortgage & Finance Shop adviser John Hughes says: “Sourcing systems have still not been 100 per cent, especially for sub-prime cases. They are fine for research purposes but for the foreseeable future we will go direct to lender.”

“No one can say a lot of work has not been done but we think the FSA is going to come down hard on us. We cannot take the risk of being liable for errors, just because the lenders and the sourcers cannot get together and get this right.”

There are two reasons why Charcol and The Mortgage and Finance Shop share these views. First, a broker using a third party to source a mortgage is legally liable for any misinformation but if the KFI comes direct from the lender, it is the latter who shoulders the legal responsibility.

Second, Charcol does not believe that sourcing systems have won in the battle to collate and distribute accurate information. Boulger says: “Some of the errors are blindingly obvious. Some are not so obvious. It is certainly not easy.”

Boulger says sourcers cannot step back from providing KFIs as they form a key part of their business proposition. But he thinks that there is a place for sourcing systems that do not provide KFIs as a way of comparing deals and as a compliance tool to prove that research has been done on the client’s behalf.

Moneyfacts decided not to produce KFIs and instead provides links to lenders’ websites. Sales and IT director Alan Hough says: “We could not establish valid procedures to verify KFIs. It dawned on us that there was a risk of misleading the broker.

“We were faced with two farcical positions. We were providing KFIs that ultimately looked nothing like the lender’s KFI. We thought as an industry we were trying to get away from such disparity. Second, there was the problem with verification which was affecting broker confidence.”

Yet sourcers such as Mortgage Brain and Trigold have plugged on with the task of producing compliant KFIs and believe significant improvements have been made.

Mortgage Brain chief executive Mark Lofthouse says, as M-Day approached, 24 lenders had still not provided KFIs but the number now is minimal.

Trigold joint managing director Bill Safran tells a similar story. Around M-Day, only a few lenders had given their KFIs to Trigold to enable them to be incorporated in its systems. Since then, he says there has been close collaboration with lenders, making the issue far more manageable.

Trigold is currently showing its enhanced non-conforming system to lenders and hopes it will be a huge development on what was available at the end of October. Part of Trigold’s Prospector AAA sourcing system, the enhanced non-conforming sourcing module can accurately source non-conforming products, taking into account the underwriting criteria of each lender’s portfolio, and provide a fact-find, data verification and KFIs.

Meanwhile, the FSA has said it will look at KFIs as part of its overall review of mortgage regulation in the second quarter of 2005. Some industry figures believe the FSA is more than disappointed at the lack of consistency with KFIs.

The Association of Mortgage Intermediaries has asked the FSA to look at why some of these documents are up to 13 pages long, when the original expectations were for between four and six pages.

But when the liability for any mistakes lies with the lender, is it any wonder that they wish to cover their backs with copious amounts of notes?Boulger says: “No doubt, after prodding from the FSA, some lenders are working on this frantically behind the scenes.” He believes there is still room for adjustments to be made on KFIs. For example, he thinks a broker should be able to select a start date for the mortgage, especially for loans with specific end dates and short-term deals. Currently, the assumption is that the mortgage will start on the date the KFI is produced or on a date pre-determined by the lender.

Portman Building Society associate director Paul Howard says: “An indicative completion date is a step in the right direction. It is not beyond the wit of man to implement.

“What we have to remember is the huge task that was undertaken. It is not 100 per cent perfect but, boy, haven’t we come a long way?”

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