Pressure builds for MMR rethink as CML warns of borrower impact
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The Financial Services Authority is coming under increasing pressure to rethink proposals in its Mortgage Market Review or risk sacrificing good borrowers.
Last week the Council of Mortgage Lenders released research that shows the proposals would have excluded more than 50% of all mortgage borrowers if they had been implemented between 2005 and Q1 2009.
Of around four million mortgages, the CML estimates that 3.8 million would not have suffered evident payment problems. The FSA’s analysis suggested that only 17% of all borrowers would have been excluded from the market.
For its research the CML used data from its regulated mortgage survey but says it has probed deeper than the FSA and based it around proposals in the MMR.
The CML’s findings also reveal that around 730,000 first-time buyers - 95% - would have been denied a mortgage despite having no payment difficulties.
Angel Mas, president of mortgage insurance Europe at Genworth Financial, a mortgage indemnity provider, says that instead of reinventing the wheel, the FSA should look at existing regulatory international models that would be quick to implement and could bring con-fidence back to all stakeholders.
He says: “We are finalising an academic report into the barriers to home ownership which concludes that without moves from regulators and lenders, the difficulties experienced by first-time buyers are only set to worsen.”
The FSA says its proposals are designed to address the major failures that have occurred in the mortgage market and it is consulting with all stakeholders to get the right solution.
An FSA spokeswoman says: “Our evidence shows 16% of borrowers are already financially overstretched and they are facing problems now as a result of their lenders’ practices in the past, not the MMR.”
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