Background

Although the mortgage market has worked well for many people, it has been a cause of major economic distress for others and the FSA's existing regulatory framework has proved to be ineffective in constraining in particular high-risk lending and borrowing.

In October 2009 the FSA's announced its Mortgage Market Review which sets out the case for altering their current regulatory approach to the mortgage market and looked specifically at whether there is a case to restrict access to high-risk lending and borrowing while ensuring consumers still have access to mortgage products

The aim of the review is to implement changes to create a mortgage market that works better for consumers and that is sustainable for all participants. The review has been built on a more intensive overall approach to supervision of firms and examines how supervision can deal robustly with those firms who adopt high-risk strategies, by being prepared to intervene where business models and strategies create undue risks for firms, consumers and the financial system generally. For the first time, the proposals include provision for regulating specific products and a requirement for lenders to assess affordability for all mortgages.

MMR survey results

Following our campaign to encourage mortgage brokers to ‘Join the debate’ www.tcfinfo.co.uk  has delivered the collective results of 2697 questionnaires to the FSA on their latest proposals in CP11/31. The feedback was delivered to the FSA ahead of the 30th March deadline, and is to our knowledge, the largest collective response on behalf of individual advisers. Commenting on the results, a spokesperson for the FSA said “We welcome the fact that mortgage intermediaries have provided valuable feedback to our MMR proposals as we have progressed through the various stages of consultation. It is important that firms make their views known and we do take their comments into account when considering any amendments. The high response rate indicates that firms have found the TCFInfo MMR survey a convenient channel to direct their views and we are encouraged by their level of involvement."

Headline results

The headline results showed that just over half (53.3%) the respondents wanted both intermediaries and lenders to be responsible for assessing income. However, comments from participants went further to suggest that this should be a three-fold responsibility. For example a typical response said “All parties, including the client need to feel comfortable that the loan is affordable. If we pass this liability onto either the lender or the intermediary (or both) then it's carte blanche for the client, who may have financial difficulty later due to some other reason, to blame the broker/lender. People need to be allowed to take personal responsibility.”

86% of respondents agreed with the FSA’s proposal that vulnerable consumers should always be advised and therefore would not be able to purchase their mortgage through a non-interactive process. However broker comments showed there was concern about the parameters the FSA may use to define vulnerable for example: “I agree that vulnerable people should not be able to buy without receiving advice. However who defines what is a vulnerable customer - in the real world it is not black and white - without understanding a customer's needs, circumstances budget and preferences (knowing your customer) it is impossible to decide if they are 'vulnerable'.”

There was a unanimous endorsement with 97.2% in favour of the FSA’s proposal to require intermediaries who only offer bridging loans to describe the restriction on their service to the consumer and 71.6% agreeing that the FSA should define a bridging loan as a regulated mortgage contract with a term of 12 months or less.

Unsurprisingly, the results showed 67.9% were against the FSA’s proposals to apply a consistent approach to regulating interest-only across the board but were instead in favour of a more flexible approach to the different consumer types.

Ipad winner

Congratulations to Brendan McCarthy the Principle of Affinity Financial Management who is the lucky winner of the Ipad competition. Commenting on the survey, Brendan said “It’s important that the FSA is aware of individual broker feedback on their proposals and I was pleased that www.tcfinfo.co.uk gave me the opportunity to express my views through their series of online surveys. TCFInfo’s new MMR content on the key proposals was quick and easy to read and I would recommend their free resources to all professional advisers.”

Use the following links to download the full results with graphs :

• Distribution and disclosure survey results (PDF)
• Responsible lending survey results (PDF)
• Niche markets survey results (PDF)

Latest MMR Paper (CP11/31) issued December 2011

The latest MMR Consultation Paper (CP11/31) pulled together all the feedback from the previous MMR papers into a package of MMR proposals and sought fresh feedback by 30th March 2012. The proposals included fresh proposals on subjects already consulted on last year such as 'responsible lending' and 'distribution and disclosure' and some new proposals that the FSA were consulting on for the first time for example interest only; the draft rules and an aggregate cost benefit analysis. This was a wide ranging paper, so we have focused on providing summaries on the proposals that most affect mortgage intermediaries.

Follow the links to read 1-page guides the full proposals for:

• Distribution and disclosure: Proposals that will affect the mortgage sales process, the role of intermediaries and disclosure of information for consumers.
• Responsible lending: Proposals that will affect lending decisions and interest-only mortgages
• Niche markets: Proposals that will affect equity release, home purchase plans, sale and rent back, bridging finance and high net worth (HNW) and business lending

FSA links

Latest MMR Consultation Paper CP11/31