FSA Mortgage Conference

19 May 2009

I am en route to speak at today's FSA conference on the mortgage market. The day started early with interviews on Radio 5's wake up to money slot and then on the Today programme on Radio 4. While it's true that the mortgage market makes headlines these days, it's not always for the right reasons!

The FSA will announce their thoughts for wholesale reform of the mortgage market. I am told their ideas will be very "green" (in the sense of open to consultation as opposed to environmentally friendly - though a reform of disclosure to cut down on paper would help on both counts!). The regulator has an opportunity to do some good in the industry and actually help would-be borrowers and those looking to remortgage. However, there is also the danger that innovation will be curbed, costs added and consumers actually made worse off. There are some "knife edge" decisions to be made.

There has been much discussion of "product regulation". Well, we've tried CAT standards (and the Sandler suite) and it failed miserably. So it's not retail product regulation that's the answer but institutional and funding regulation that needs to be addressed. Too many lending institutions flooding the market with poorly risk-assessed and untenable products helps no-one and builds a propensity to bubble-like conditions.

FSA need to review their authorisation process. Time and time again we see the regulator assessing firms which are behaving poorly... but they are the ones who granted the people running the firm the remit to do so - and were supposed to check the business plan for robustness and also make sure that's what the firm actually did! The whole process needs root and branch reform.

The financial promotions and disclosure regimes are simply out-dated. If this were not the case high street institutions would not be able to run adverts claiming to offer "impartial" advice that actually offered little more than slick-sales. Where is the regulator's enforcement team one wonders?

We have seen a huge focus on mortgage fraud - and rightly as it is a cancer that eats at the reputation of the sector. Yet the only action taken is against bad intermediaries who should not have been granted authorisation in the first place. But can an intermediary commit "fraud"
in isolation? Surely if it is a "successful" fraud monies must have been released from lending institutions... Were they complicit or duped? And if duped how was it possible for such small firms to beat the systems and controls of far larger institutions? I am waiting for the other shoe to drop and the suspense has been building for a long time; one wonders what is causing such a delay and where the police interest is in such matters?

This is a time for joined up thinking between the Treasury, Bank of England and FSA. We need to see lenders being "encouraged" to lend rather than having mixed messages delivered to them about capital protection, rebuilding balance sheets and offering some limited lending. The state controlled lenders should have a segregated funding commitment to lend to first time buyers as a way of kick-starting the market.

We have recently published two reports that explore these ideas more and they can be accessed through our website. The first is a report on the Fiscal Stimulus needed for the market, the second looks at the future of retail regulation. Members' views are sought on both topics so that we can lobby for your, and your clients', best long term interests.

Today is the day to express your views. The mortgage market, and wider housing policy, will affect your business, speak up and speak loudly!