Cost of scrapping KFI could run into millions
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Replacing the Key Facts Illustration could cost the industry millions, Paul Broadhead, head of mortgage policy at the Building Societies Association, has warned.
The much-anticipated European Mortgage Directive is due out this week, which is expected to propose that the KFI be replaced with a European Standardised Information Sheet.
Broadhead says this would force lenders to change their systems and bring extra cost at a time when the market is already fragile.
He says: “Bringing in the ESIS would have huge implications for lenders in terms of cost.
“The Financial Services Authority has estimated that just one format change to the KFI would cost lenders £26m to change all their systems, so if they were forced to change the contract it would be a lot more.”
He adds that there has been a lot of focus on how the extra costs will affect consumers, but nobody is concerned how the industry will foot the bill.
The European Commission is also expected to make it a legal obligation for lenders to disclose why they have refused a mortgage applicant.
It will also reveal whether advice will be compulsory and if brokers and staff at lenders need to be individually registered.
Robert Sinclair, director of the Association of Mortgage Intermediaries, says the EC faces a lot of pressure from lenders to make individual registration compulsory for brokers but not lenders.
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