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8 | Questions from Hell
Questions
from hell
This month’s Questions from Hell tackles all
your mortgage and GI regulatory queries
courtesy of Bill Warren
T
he biggest single issue in recent the sake of a few? I think my answer to this is is also annoying as it is not cheap. Why is it
weeks has been the possible pretty evident. Now off the soapbox and on to not required?
restrictions in loan-to-value the postbag of questions received. Answer: Like you I had assumed as firms
percentages and perhaps more Question: The direct to lender product and applying to undertake SRB business had to
importantly the potential regu- advice issue have had so much air and media comply with the FSA’s threshold conditions
lation of affordability by the space that its now in danger of being side lined that PII cover would be required, as it is for all
FSA. A recent Association of or ignored. Why do so many fear the lender other regulated activities but it is not. I have
Mortgage Intermediaries (AMI) survey indi- direct products and how would you advise not been able to establish why it’s not required
cated that many mortgage brokers favoured clients to address it? We are a small firm with but I assume there is a very good reason.
lenders taking full responsibility for the assess- five advisers and it has done us a lot of damage However, from the consumer protection
ment of affordability in all cases. Personally I in the short term. position I do find it a surprising omission,
found this very worrying, as this would under- Answer: There is still a basic fear of especially given that the SRB arena is described
mine the very existence of mortgage, and per- charging fees to clients for the research and as high risk, hence the speed with which it has
haps any other financial, advisers therefore advice provided where the end result is been regulated after pressure from the OFT. I
allowing the product provider to have total recommending a direct to lender product. My can understand your annoyance at the cost,
control, which of course would suit them per- advice remains to embrace the issue rather but at least when it comes to full authorisation
fectly. Clients still use an intermediary for the than fight it. Yes it has and does make life very in June 2010 (only 10 months away!!) you will
majority of mortgage cases as they believe in, difficult but is systematic of the current market be in a stronger position.
and expect, an objective market review and and however much we moan it there is little Question: The FSA and others have had a
assessment of their personal needs. To abdicate suggest that it will go away. It has worked to lot to say about brokers and lenders allowing
responsibility for the advice given, whether it’s our advantage for several years for well-known borrowers to obtain much larger loans than
relating to mortgage affordability or any other reasons especially when lenders needed they can afford recently. What should be done
related assessment, could be the thin end of volumes. Find a good sourcing system. Being to stop the FSA imposing potentially totally
the wedge for intermediaries, especially in the realistic about the fees charged and totally unrealistic new rules preventing brokers from
mortgage market. open with clients will help break down these treating clients as individuals? Is this an
Granted PII cover is not cheap, but I think barriers, after all clients expect to pay a infringement of their human rights? As an
its important not to let the actions of the few - solicitor or an accountant for advice received AMI board member what is AMI doing about
and by that I mean those who have either so why not their broker? it?
committed fraud by over stating mortgage Qestion: We have recently applied to the Answer: As you will see from my comments
applicants income or similar - to drive the FSA for interim authorisation to undertake above I also feel strongly about this issue and
whole industry’s future. We, the industry, must Sale and Rent Back (SRB) business and put in the principle behind it. I am not sure I am
stand firm and demonstrate an acceptable level place PII cover before doing anything else. The qualified to answer your question re human
of responsibility thus avoiding a potential FSA has likened SRB to MCOB so this seemed rights but as that legislation seems to cover so
return to simplistic income multipliers and to be a given as part of the FSA’s threshold much it’s a reasonable assumption. Your
prevent the clock from turning back 30 plus conditions. So with this in mind I was amazed question about what AMI is doing should be
years. MCOB currently gives the means to do to learn from the FSA that PII wasn’t required addressed to AMI, but you will see action no
this so the question remains why change for for SRB business, which seems very risky and doubt.
October 2009 Mortgage Introducer www.mortgageintroducer.com
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