Industry respond to MMR proposals

The industry respond to FSA proposals in the latest stage of the mortgage market review.

Related topics:  Mortgages
Millie Dyson
19th December 2011
Mortgages
1 in 40 homeowners could struggle to get a mortgage under new proposals announced by the FSA

Welcoming the long overdue publication of the FSA’s proposals into the Mortgage Market Review, Grenville Turner, Chief Executive of Countrywide, said:

 “Mortgage advice does not allow for a one size fits all policy and we’re pleased the MMR proposals finally accept this. It is widely acknowledged that the current mortgage advice process is confusing for customers.

"The FSA has responded to customers’ needs and simplified this process by scrapping the non-advised process favoured by most banks and have proposed measures to allow the majority of customers to receive the right advice based on their circumstances from qualified advisors, whether by telephone, online, in a bank branch or with a mortgage broker.

“One of the most positive changes is that these proposed measures provide the much-needed clarification on the grey area surrounding where responsibility for measuring affordability ultimately lies.

"The lender assuming responsibility for ensuring the affordability of the loan removes any confusion, providing clear and adequate protection for consumers.”

Will these proposals make it easier to get a mortgage?

“Where the proposals fall short, by the FSA’s own admissions, is that 1 in 40 of new customers that would currently be eligible for a mortgage could potentially struggle to get a mortgage if the proposals were introduced in this market.

"In an environment where lenders are already being extremely cautious with their lending criteria; by placing all affordability assessments at the doors of lenders risk teams this could create an even stricter lending environment.

“To ensure that these measures do not stagnate the market further, lenders will need to become more flexible with the affordability assessment criteria for new borrowers including a workable replacement for the self-employed and homeowners stuck in negative equity.”

“Under the proposals, self-certified mortgages are a thing of the past due to the requirement for every mortgage to be income verified. However, lenders now have an opportunity to adapt their verification procedures to ensure that self-employed customers, who traditionally used self-certified products are not left out in the cold.

"One of the measures that can be considered is assessing the spending patterns of the applicant rather than entirely focusing on income levels.”

Regulation and professionalism in the industry

“Whilst we wholly support the FSA’s recommendation on ensuring that all mortgage advisors are fully qualified with an appropriate and approved qualification, it is disappointing to see that the FSA has stopped short of making clear their intentions on individual registration.

"At Countrywide, we firmly believe that this would cement the foundations for a level playing field for professional standards in the mortgage industry as well as assist in fraud prevention measures.

"We would urge the FSA to reconsider this during the consultation process, as necessary qualifications combined with individual registration raises industry standards and professionalism, which can only be a positive outcome for consumers.”

Paul Hunt, managing director of Phoebus Software said:

“In its analysis of the market for first-time buyers, the FSA’s Mortgage Market Review shows the proportion of lending to FTBs is actually higher than it was before the financial crisis.

"The report puts this down to a drop in remortgaging, but it fails to mention that the fact FTB lending hasn’t fallen as far is a result of an impressive willingness among lenders to drive forward the property market at the lower end.

"Today’s first-time buyers are tomorrow’s higher-value purchasers and a failure push forward this section of the lending market will, in the long run cause instability in property prices and greater uncertainty for lenders and borrowers.

"Lenders have since 2008 shown they are doing a great deal to ensure there is an ongoing supply of finance to first-timers, taking advantage of the MPC’s benign monetary decisions and offering record low rates this year.

"If this hadn’t been the case since the downturn, we could have seen property values slide much further.”

MORTGAGE REFORMS WILL BE BETTER AS FSA HAS LISTENED, SAYS CML
 
The Council of Mortgage Lenders welcomes and broadly supports the revised package of proposed reforms published in a consultation paper by the Financial Services Authority today.
 
The CML had previously been extremely concerned that the FSA's earlier proposals (CP 10/16) would have had a disproportionate and detrimental effect on consumers in the mortgage market, as well as on lenders.

The FSA has, however, listened to those concerns and has now refined a far more workable and appropriate set of measures. These will enable consumers to get mortgages suitable for their needs, within a regulatory approach which provides sensible safeguards.
 
While there are bound to be specific aspects of the consultation that will require a detailed industry response, the CML is pleased that the FSA has recognised both the principle and practical difficulties that would have arisen from the earlier proposed package of measures.
 
CML director general, Paul Smee, comment
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