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Window of opportunity

M-Day With Mortgage Day came much industry grumbling, especially over KFIs, but it’s not all been bad, explains Lindsey Rogerson

One year on from Mortgage Day and the view on how well the past 12 months has gone changes depending on who you talk to.

The first few months after mortgage day were “really quite horrendous” is the view of Pink Home Loans managing director Tony Jones. This is in stark contrast to the UK’s biggest mortgage lender, Halifax, which says feedback in the run-up to, and since mortgage day, has been overwhelmingly positive.

Money Marketing research found that, in terms of mortgage regulation, there were just two points on which lenders, packagers and brokers agreed. First, the downturn in the housing market, rather than any knock-on effect from bringing mortgage intermediaries under the protective wing of the FSA, is to blame for the dip in the volume of mortgage transactions.

Second, the trend towards higher arrangement fees in the past year was merely co-incidental and had nothing to do with the industry passing on the cost of FSA compliance to consumers.

When questioned, brokers said they had not noticed any discernible increase in the time it takes to turn around mortgage applications. Halifax spokesman Paul Fincham says: “There was much talk about how mortgage interviews would take longer but that has not being our experience. The KFI, which is the single most noticeable change from the consumers’ point of view, has been well received. Consumers have responded positively to the introduction of the KFI.

The FSA introduced KFIs to provide an easily comparable point of reference for mortgage hunters but not everyone agrees.

Jones says: “Someone told me that they had 70 pages of features by the time they had looked at a few products for a client and when they gave them to the client, he throw it in the bin.”

Jones is sympathetic to the plight of lenders. After endowment, pensions, split-capital investment trust and precipice bonds, he says it should have been obvious that providers would seek to wrap themselves up in legalese which has resulted in some firm’s KFIs running to 12 or more pages.

Jones believes the situation could have been averted if an all-encompassing group such as the Council of Mortgage Lenders had come up with a template for KFIs.

The FSA has stepped in and said it wants to see KFIs cut to four or five pages.

“If you have a complex product such as a lifetime mortgage, then it is going to need a longer document but if you have a straightforward product, then you can do it in four pages. To me, a 13-page key features document is a paradox,” he says.

However, it’s not all bad for intermediaries. Consumer reluctance to sit through numerous fact-find sessions at a succession of different mortgage providers has presented a business opportunity for brokers as those looking for a mortgage prefer to let the broker shop around for them.

It is not all plane sailing, though, and intermediaries across the board complained about the hassle involved in getting verification of KFIs from multiple lenders. The steadfast refusal of sourcing companies to offers verification is frustrating many.

London & Country Mortgages head of communications David Hollingworth says: “If you want verification from the lender, you have to go from one website to another and many require a different password. We would prefer lenders to work together.”

Another opportunity presented by Mortgage Day has been for networks to scoop up small and single-broker businesses as their proprietors came in search of administration support. A year ago, it was touted that many small firms would simply pack up shop when faced with the extra admin burden imposed by regulation. However, while everyone admitted a small number had seized business, no one believed there had been a widescale loss of advisers across the industry.

Everyone believed the FSA’s checks into the sales of sub-prime mortgage products by smaller broker firms in September and the earlier mystery shopping exercises into if and when adviser presented consumers with details how they were paid for advice as well as KFIs, were helping to keep everyone on their toes and ensure the industry continued to raise its game.

Looking forward, there is a general feeling that the worst is over, particularly with regard to technology problems, although Jones pointed out that any changes to systems, which would enable KFIs to be trimmed back, would take months to filter through.

“The industry has adapted remarkably well but we need a pragmatic solution that recognises the differences in our industry and acknow-ledges, for instance, that sole traders do not have a corporate entity behind them doing the administration.”


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