Mortgage Day finally dawned but how did Monday, November 1 differ from the last day of business outside of full statutory regulation and how does the new regime impact on brokers’ daily workings?
Key features illustrations were one of the major expected stumbling blocks.
Most mortgage advisers now recognise they can only get accurate KFIs from lenders’ websites, not from mortgage-sourcing systems where they would have traditionally turned for illustrations.
The additional data required under KFI rules has involved most lenders upgrading their IT systems and in some cases replacing them in a very short timeframe.
A survey of lenders showed that most lenders say they had some form of system in place but for a significant number this was only a temporary system. Moneyfacts surveyed 107 lenders, with 99 of saying they could produce a KFI direct to customers and just 47 able to produce a KFI online.
This inconsistency is one of the major headaches facing mortgage advisers in the regulated world.
Money Marketing asked four brokers about the reality of wrestling with the difficulties surrounding KFIs and the other issues that mortgage regulation has thrown up for them.
Park Row Independent Mortgages
Managing director Kevin Paterson says: “Will brokers have noticed a big change between before and after Mortgage Day? It depends on how good the broker was already. For us, the difference is a step-change.”
He says the nature of sales under full regulation has not changed but there is more attention to detail. Paterson says incomplete paperwork would not previously have been ideal but in the regulated market even minor record-keeping gaps could have major repercussions.
The lack of preparation among some lenders on KFIs means it will prove difficult to maintain levels of business, adds Paterson.
On M-Day, brokers had to spend time registering on lenders’ websites to get accurate KFIs direct.
Paterson says the new regime has demanded brokers spend more time explaining the KFI forms to consumers. He says: “The old illustrations were two pages, the new ones are six. The poor client will be wading through pages and productivity will suffer. We are going to have to spend more time on paperwork and less with clients.”
Despite these issues, Park Row’s attitude after the onset of regulation is positive and Paterson is bullish: “Bring it on.”
On day one of statutory regulation, Charcol senior technical adviser Ray Boulger reckons that certain requirements, such as the need to explain the initial disclosure document, added around 10 minutes to each mortgage interview, not up to half an hour, as some commentators were expecting.
He says the standout issue of the day was, as predicted, the inconsistency across lenders in getting out KFIs, with some lenders offering brokers online forms prepopulated with details while brokers had to call others to get a KFI faxed.
As regulation beds down, Boulger expects a range of smaller but important issues to emerge. He says: “There are still some unresolved issues about showing inducements and there are still areas where lenders and advisers are not agreeing on, such as whether to quote the last day on a discount offer as the first of the month as is usual, or the 31st. There are going to be plenty of these things which need sorting out over the next few weeks before it settles down.”
Director Jo Roberts says: “There is a lot more paperwork and everything has to be a lot more rigid and a lot of existing documentation has needed to be replaced.”
While Needanadviser. com readied itself months ago for M-Day, Roberts believes there are plenty of brokers who waited until the last minute to make these essential changes.
On day one, Roberts says one of the most surprising changes was the service she received from the FSA when she phoned with a query. “I think they must have recruited new people for the start of regulation, because the lady I spoke to was really helpful and really knew what she was talking about.”
Looking ahead, Roberts expects with the added reporting and other requirements after M-Day that volumes of mortgage business being processed will fall and might not get back to pre-regulation levels.
She anticipates problems in the near future but the firm’s optimism about the future of the market is perhaps best illustrated by the fact that it chose M-Day to start a new recruit at the firm. Roberts says: “We welcome regulation and our attitude is that it will all work out fine.”
The firm has been running regional seminars for months, detailing, as managing director Rob Clifford says: “You used to do this, now you have to do that.”
Clifford says: “The KFI remains the single biggest issue. We have been told by some lenders that they cannot issue KFIs at the point of sale, meaning that for some brokers there will be less chance of the one-meeting sale.”
He says this has affected productivity and that from day one, many advisers can expect their pending caseload to start building up.
He also believes the added impact of new requirements under regulation might add up to two hours per case. He says: “We have started on a huge learning curve, swapping a 14 page voluntary code for a 1,000-page FSA rulebook.”