Industry frustrated by heavy handed MMR proposals By Sarah Davidson
Proposals set out by the Fi- nancial Services authority on responsible lending in June were seen by the in- dustry as “heavy handed” and overly restrictive of an already depressed mortgage market. the Building Societies as- sociation, the association of mortgage intermediaries, the council of mortgage Lenders and the intermediary mort- gage Lenders association all said the proposed regulation will hamper the market and limit consumer freedom. the consultation paper included proposals to make income verification manda- tory, banning self-certifica- tion and fast-track mortgages from the market; to make lenders assess borrower af- fordability on an income and expenditure basis; and pos- sibly to restrict interest-only mortgage availability. Lenders will have to apply buffers to affordability for borrowers with credit im- paired histories, and will be responsible for ensur- ing borrowers can afford to repay the capital and inter- est on their mortgages. the cmL said making lenders responsible for affordability could limit their appetite to deal with the whole of the broker market – just one of the reasons brokers feel un- duly punished by the pro- posals. the future capital require-
ments non-bank lenders are also under discussion and imLa is worried that forcing lenders that don’t take retail deposits to hold too much capital would squeeze them out of the market, reducing
competition and innovation. oxera, a consultancy commissioned by the FSa, estimated the total ongo- ing costs for the industry to maintain compliance with these requirements to be in the region of £5.8m to £20.3m per annum. John charcol’s ray Boulger
said some of the sensible points in the paper were ob- scured by the “heavy handed- ness” of blanket banning self- cert and fast-track mortgages. the wider broker market
believes the regulation will make it yet harder for them to do their jobs and Vincent Parker, a newark based bro-
It keeps coming... by
Robert Sinclair director AMI
as the emergency budget recedes into the distance, the real impact will not be felt until 2011 when the Vat increases, tax hikes and the cuts in public expenditure start to become visible. However the stern medi-
cine to be applied has done much to maintain our cred- ibility amongst credit rating agencies, the pound is hold- ing value and uK debt is not having to be sold at damag- ing rates. as long as this continues, then the patient should be capable of surviv- ing the trauma. unemployment continues
to baffle economists who are seeing firms holding on to experienced people in a way not seen in previous down-turns. inflation runs ahead of mPc targets but the guv’ner, mervyn King, continues to chart a steady course where expectations are that it will fall under the 2% target without significant
action. it is about when, not if, in his pronouncements. this is not a bad thing as it is reducing the real value of our significant debt burden both nationally and person- ally. We will begin to see small base rate rises. Person- ally i think we will see the first of these before the year end, although it could be a minor 0.25% rise. the big news of the last month was the lender mmr on affordability, and the deci- sion by the FSa to propose enforcing validating income with the resultant loss of self-cert mortgages and the complication of fast-track. the complexity of the new affordability assessments runs the real risk of chang- ing the dynamics of our mar- ket as it reduces the ability of individuals to make life-style sacrifices to afford the home they really want. We will have to save first, not borrow heavily and repay. the FSa are also not being entirely helpful. in giv- ing us the proposals in bite- sized chunks we have to re- spond to part of the picture without seeing the end- game. We had to respond
on authorisations before we saw the lender rules. We will respond to these affordabil- ity proposals before we see the sales and distribution proposals. the FSa must have a vision of what the market looks like at the end of this. i am concerned that they do not want to share this and it is firmly cloaked in mystery. i am unsure whether i will feel relieved as the magician gives me back my watch, or feel like the bull run into the ground by the matador. gross lending has improved and i am sure that intermediary market share remains robust. i am not of the view that we will lose more brokers from the industry, unless they choose to go. Whilst some lend- ers may have provided data about reducing who they do business with, it is consum- ers who choose who they buy from. these banks may want to
drive more to their branches but they have a lot of work to do for consumers to want to go there. if we keep doing the good work we do, consumers will keep us in business.
mortgage introducer AUGUST 2010 5
ker at assured Financial So- lutions said: “if brokers don’t want to get bullied out of the market completely, we have to stand up for ourselves. i feel like i’m fighting every day just to do my job. i’m fed up. i’m ready to fight or die.” See cover feature, pages 18-23, BSA view, pages 28-29
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