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consultation paper [CP10/16], our focus is on how the market works, whereas [Mortgage Introducer] is looking more at social policy, which would not really be suitable for us [to comment on] as it is not within our remit.” The avoidance of taking responsibility is seen by many in this industry as a disturbing trend with the FSA. Brokers, lenders and trade bodies alike are wringing their hands in frustration with a regulator deemed to be unable to engage meaningfully with the people practising in the market. John Heron, managing director of buy-to-let lender Paragon, is a little more restrained in his delivery of that view, but the sentiment is the same. “A great irony of the FSA’s Mortgage Market Review 10/16 is that it could cause serious damage to the consumers that it is intended to protect,” he says. “It is shutting the door on many potential homeowners’ hopes of ever getting on the property ladder.” Robert Sinclair, director of the Association of Mortgage Intermediaries, believes a large part of the cause of the financial crisis was due to the FSA’s failure to supervise the financial services industry under the existing MCOB regulation put in place between 2004 and 2007, adding “it was the failure of supervision rather than of lenders or borrowers”.
The FSA has admitted that it failed to
regulate properly, but it has failed to understand that regulation was not the problem, it was the supervision of the regulation.
The incoming rules and regulation littering the mortgage market in the post-recession world are seen by many as the FSA saying: it wasn’t our fault, it was the fault of the regulation. They were bad rules, and the lenders were bad because they lent irresponsibly, and the consumers were bad because they borrowed irresponsibly.
Industry consensus appears to be erring towards the feeling that changing the rules to solve the problem is not the way forward. Paul Broadhead, head of mortgage
20 mortgage introducer AUGUST 2010
policy at the Building Societies Association, says: “Has there been irresponsible lending by some lenders? Undoubtedly yes, so shouldn’t the FSA deal directly with those firms rather than introducing costly rule changes across the whole of the market? Despite this, the FSA has its own view and believes that there are a number of areas where detailed rules and intrusive regulatory intervention are required.”
“HAS THERE BEEN IRRESPONSIBLE LENDING BY SOME LENDERS? UNDOUBTEDLY YES, SO SHOULDN’T THE FSA DEAL DIRECTLY WITH THOSE FIRMS RATHER THAN INTRODUCING COSTLY RULE CHANGES ACROSS THE WHOLE OF THE MARKET? ”
animal farm
It harks back to ‘Animal Farm’. The animals on a farm are fed up with being ruled by humans and so overthrow them, establishing a social state which has a constitution of seven commandments, the most important being “All animals are equal”. Time moves on and the cleverer animals, the pigs, decide that they should have more influence over the running of the farm because they know what’s best for the stupider animals. They slowly and surreptitiously amend the language of the commandments to
justify their growing authority. The closing chapter sees the pigs, formerly recognisable as animals walking on four legs, strutting around the farmyard on their hind legs in a hideously distorted emulation of humanity.
The final nail in the coffin is when the seven commandments, ripped through by the power-hungry and increasingly fascist pigs, are all but demolished, leaving just one statement: “All animals are equal, but some are more equal than others.”
It is a terrifying condemnation of the truism that power corrupts. In the mortgage world, regulation takes the place of the commandments, and it looks possible that we are starting down a road that is unthinkable in modern Britain. Ray Boulger, senior technical director at John Charcol sums up the industry discontent with this regulation and fear that it is taking away our individual right to choose. “There are some good things in this paper but these are spoilt by the FSA going way over the top on some aspects of policy,” he says. “If I wanted this heavy handedness I would go and live in North Korea, but I choose to live in the UK because I value and want my personal freedom. “Hopefully North Korea will set up an equivalent body to the FSA and we can then recommend lots of people to go and work for them.”
let the PolitiCians deCide on soCial PoliCy In the UK, elected representatives are given the mandate to decide how the country is ruled. They are held to account by parliament, the House of Lords and the judiciary. It works because the electorate has the power to vote them back out of government if they disapprove of their behaviour. Heron poses the question on the lips of everyone in the industry: “Adair Turner states that the FSA wants to take pre-emptive action to curb consumer detriment, but whilst this is a laudable objective, is it right that they place consumers in straightjackets to achieve it?”
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