News Review


Fast track back in the firing line By Sarah Davidson


industry pundits have been fighting the case for fast track loans again. michael Bolton, former chief executive of edeus said the “liar loans” should be scrapped. Bolton, now european sales


director of clayton eurorisk, said investors will never have the confidence to buy uK mortgage backed securities while banks persist in trying to save “fast track liar loans” from the regulatory axe. He said: “Lenders appear


still to be dragging their heels on fast track but there is no justification for it staying. it’s as open to abuse as self-cert is. it’s just another version of a liar loan.” Fast track loans were tipped


for the scrapheap last summer when the Financial Services authority published cP 10/16, which expressed concern that


fast track mortgages would be “gamed” if self- cert mortgages were culled. But iain Laing, chief credit


officer at Santander, says to call fast track “liar loans” was “really out of context”. He said: “Liar loans refer


to self-cert in the uS, not fast track in the uK. to clear up any confusion remaining around fast track we are now calling this type of loan point of sale validation and that still amounts to the broker checking income and Santander checking that the broker has checked income. “We do random sampling


on fast track cases that picks up the brokers who are not verifying income and they are cut from our panel immediately if they fail to show sufficient evidence. “in our experience brokers are checking these


loans to our own and wider underwriting standards and we are satisfied with our controls. that is reflected in the fact that these loans perform well with low arrears - partly because we only offer them on good quality apps.” Laing added that investors


he had spoken to did not seem to have a problem with the fast track loans done with these controls in place. He said ratings agencies


moody’s, Fitch and Standard & Poor’s had, in his experience, “no issue with fast track at least in the way we operate it”. PmS executive chairman,


John malone, added that it would be a blow to the industry to lose the type of fast track offered by lenders such as abbey for intermediaries - Santander’s intermediary lender.


“over the last six months


afi has enjoyed success with intermediaries in their support of the fast track proposition,” he said. “on the basis that brokers


know they have to retain the appropriate verification to support the transaction, failure to comply means they are struck off from submitting business to afi for three month period. i think what afi is doing is extremely important to the market.” Bolton insists that the


crux of his argument is to reinstate trust in the quality of mortgages being written. “it is incumbent on


the market to encourage investors back,” he said. “otherwise the number of mortgage participants on both sides will continue to shrink as the market shrinks.”


FSA wants product intervention debate By Sarah Davidson


the Financial Services authority has published a discussion paper to encourage the public and interested parties to debate how far regulators should intervene on products to protect consumers. the FSa has already


demonstrated a more interventionist


approach


to regulation with the aim of anticipating consumer detriment where possible and stopping it before it occurs. this latest paper proposes a


range of future interventions that could be introduced including banning products or prohibiting the sale of certain products to specific


groups of customers. FSa chairman, Lord


turner, said: “the crucial issue is how far along this spectrum of earlier and more intense interventions we should progress. this debate comes at a critical time as the scope and powers of the consumer Protection and markets authority are being discussed by the government, parliament and stakeholders. it is fundamental to shaping the regulatory philosophy of the new organisation. “our analysis has led us


to the conclusion that a significant shift in approach is required but there are important tradeoffs to be struck – between consumer


4 mortgage introducer FEBRUARY 2011


protection and consumer choice, between effective regulation to prevent customer detriment and the costs that that will inevitably impose.” a statement from the


council of mortgage Lenders said: “Protecting consumers is an important issue to get right and we support a wide- ranging open debate that deals with not only this topic but also consumer responsibility.” But ray Boulger, senior


technical director, said specific product regulation runs the risk of “throwing the baby out with the bath water”. He said: “my general feeling


is that product regulation is a bad thing and that if you are


going to have it, you have to be very careful you have the right people deciding how and what to ban. my view is there are people more qualified to do this inside lenders and brokers than at the FSa.” Boulger also said the


FSa’s existing regulatory responsibility on supervising financial advice should be sufficient to stop consumer detriment. He added: “if a lender


comes up with an unsuitable product and then an adviser recommends it to the consumer’s detriment then the FSa already has the authority to judge whether that was inappropriate. ” consultation closes on april 21.


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