Level proc fees thought to be on FSA's agenda
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Rumours are rife that level proc fees and the end of fast-track and self-cert could be on the cards in the regulator’s upcoming Mortgage Market Review.
Industry sources say the aim of level proc fees would be to eradicate the commission bias that could lead to clients with good credit histories being placed on sub-prime loans with higher proc fees by advisers.
The Financial Services Authority is also said to be looking at axing fast-track and self-cert loans, with some income verification mandatory on all loans.
The Royal Bank of Scotland last week effectively stopped doing fast-track mortgages, sending an email to key accounts informing them that it will check all fast-track cases.
And The Mortgage Works gave brokers until 8pm on Friday to get all self-cert applications in as it has pulled its range, with no decision on whether to reprice.
There have also been mixed messages over product regulation, with some claiming the FSA is no longer considering this.
But one well placed source warns it could still be on the agenda.
The source says: “I don’t think the subject of product regulation has gone away. There’s a great deal of political impetus to move towards it. In terms of LTV and loan to income caps, I do not think the door is closed.”
There has also been talk of the FSA applying the same adviser categories to the mortgage market as are specified under the Retail
Distribution Review for investment brokers from 2012. This would mean advisers being categorised as restricted or independent.
David Hollingworth, mortgage specialist at London & Country, says this would not be welcome and argues that the mortgage sector is not like the investment market, in which some products come with high commissions.
And while level proc fees may be a good way of providing more transparency Hollingworth says there could be a downside.
He adds: “There will be times when lenders want to reward distribution channels differently. This move would hinder their ability to do that.”
Andy Pratt, chief operating officer at Alexander Hall, argues that there is nothing fundamentally wrong with either fast-track or self-cert, it’s just how they are done.
He says: “Some people such as taxi drivers have complicated income structures. That is why self-cert exists. There’s no reason why self-cert should not apply to such cases, but it has been abused so lenders must tighten the process.”
