MIp13_1209:MI 12 Jan 24/11/2009 16:29 Page 3
Mortgage Market Review | 13
Consumer
confidence is key
Bob Hunt, chief executive of Paradigm Mortgage
Services, looks at what the Mortgage Market Review
(MMR) means for lenders, brokers and consumers
I
t will not have escaped your notice drive out the more shady elements and re-profes- quality, we will not only improve cost/income
that the industry has been dominated sionalise aspects of the mortgage industry. The ratios just when it's needed, but will also encour-
lately by discussions around the quality of advice and range of solutions available age an environment where, with sensible checks,
Mortgage Market Review (MMR), its to consumers is not easy for a professional advis- there will be a place for self-certification and
recommendations and where it might er to understand, never mind a layman, so hope- specifically products that suit the self employed
take the mortgage advisory profession. fully by attending to the above areas regulators or specialist earnings groups, i.e. those with
It is important to understand the main will drive up standards and help the profession- unusual or irregular patterns of earnings.
facets of the document as the next few months als. Fast-track lending still has a place too, and as
give us all a chance to educate ourselves on what One of the main talking points has been ‘self- liquidity and lender’s lending capability returns,
the FSA wish to see and to also take up our certification’ loans, and ultimately the concern we will see a more competitive and, I'd forecast,
opportunity to respond to the paper itself. that new rules will mean that a perfectly valid clearer practices where intermediaries and
The FSA Mortgage Market Review (MMR) product - designed with specific applicants in lenders will work together to provide the right
paper (www.fsa.gov.uk/pubs/discussion/ mind - will no longer be available. In short, for loan, underwritten well, ultimately protecting the
dp09_03.pdf) comprises 118 pages, and for the ‘self-cert’ loans lenders do not ask for proof of consumer far better than previously.
most part, does not contain anything that hasn't income - and as a consequence they build in this Lenders have been busy reviewing distribution
already been anticipated. The key is really more greater risk in the product pricing. At its peak strategies and largely speaking now place greater
about how these changes will be introduced, this specific type of loan represented circa-10 per emphasis on value rather than volume. Since
where my firm view is that they will benefit not cent of all lending, and should not be confused our own inception we have challenged both
only the industry, but ultimately the consumer. (as is often the case) with ‘fast track’ loans. Fast lenders and our member firms to place quality
I'm not saying everything will be rosy or there track loans are offered where the lender deems and value at the heart of their practices, where in
won't be consequences that will need some time that the loan is lower risk, typically a low loan to old -fashioned parlance, we'd all rather see for
and effort to get to grips with, however this is value (LTV), and therefore they don't seek the every £1 million of lending a more positive or
where advisers should come into their own and same scale of information or verification. better contribution. Likewise, a lender who
show the value of the advice they provide. Lenders are already (as part of their own secures £1 billion lending from one distributor at
Beginning with the content of the MMR; the improved risk controls) ensuring they improve a lower cost or higher value than another is clear-
review’s key features are: affordability checks, and thus it seems a sensible ly switched on properly in terms of key account
• The imposition of affordability tests for all move to me that the regulatory focus is switched management.
mortgages, making lenders ultimately responsible to lenders, to ensure only those customers that We should also welcome the proposal that all
for assessing a consumer’s ability to pay. can afford a loan get a loan. Critically, lenders mortgage advisers be individually regulated with
• Banning ‘self-cert’ mortgages through should ensure that the right type of loan, for the FSA - where for distributors and lenders
required verification of a borrower’s income. example, the degree of LTV permitted, is alike, tracking bad practices (and good) and act-
• Banning the sale of products which contain matched to the customer. While we can all think ing to support the best advisers has not previ-
certain ‘toxic combinations’ of characteristics of examples of how good borrowers will get ously been made easy.
that put borrowers at risk. caught up in the inevitable increased and more With all that has happened in our market in
• Banning arrears charges when a borrower is demanding underwriting involved for the major- the last two years, any regulatory move that
already repaying and ensuring firms do not prof- ity of potential borrowers (often ill-informed undermines consumer confidence in the mort-
it from those in arrears. and in real need of advice) this will mean they gage market will impact the recovery in the
• Requiring all mortgage advisers to be person- are matched with the right type of loan and one housing market - confidence should still be the
ally accountable to the FSA. they can truly afford. key consideration. Therefore, as advisers we
• Calling for the FSA’s scope to be widened so These moves will create more ‘responsible need to look to embrace these potential
as to cover buy-to-let and all lending secured on lending’ which in the medium to long term is changes and in particular to look to create an
a home. better served for all involved in the distribution environment which encourages lenders and
Without question, much as we experienced in chain working together more closely. By lenders regulators to trust our role and the essential
the late 1980s and early 90s in the IFA sector, we increasing their collaboration with intermedi- part we play in advising the majority of bor-
all know there has been a need for a while now to aries, and working closely to improve application rowers in the UK.
www.mortgageintroducer.com November 2009 Mortgage Introducer
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