FSA fights MMR criticism
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The Financial Services Authority has defended its proposals in the Mortgage Market Review and disputed research from the Council of Mortgage Lenders which claims they would exclude around four million home owners.
The CML research released in October found that around half of all mortgages taken out between 2005 and 2009 would not have been granted under proposals in the MMR.
Speaking at the Building Societies Association Annual Mortgage Seminar, Lynda Blackwell, mortgage policy manager at the FSA, hit back at the research, saying she was surprised by the amount of controversy the proposals have attracted.
She believes a lot of what it is proposing already exists within firms.
On the CML research, she says: “An assumption has been made that if a mortgage is affected by any of our changes it is not granted at all.
“In most cases, however, the impact would be a change in the terms of the mortgage available and not the refusal of any mortgage at all.”
She says the suggestion that it will create mortgage prisoners by trapping people and leaving them with few choices is not accurate.
She says: “People are of course already trapped because of the market contraction although happily the majority are currently better off on their lender’s SVR.
“We estimate the contraction has already impacted over two million borrowers – borrowers who are impacted now, before we have made any changes.”
She says the FSA could have gone much further, for example, by imposing strict LTV thresholds, but it has decided against it because of the potential impact on consumers.
Blackwell says far from removing responsibility from consumers to lenders, stricter affordability checks will have the effect of encouraging consumers to consider their ability to repay the mortgage more carefully and make them more responsible.
She also defended the regulators’s stance on fast-track, saying and processes can be “gamed” by brokers who know the rules and who know where to place cases if they don’t want to provide evidence of income.
And with the demise of self-cert, the point of least resistance becomes fast-track.
She says fast-track would simply develop into self-cert by another name.
She admitted discussions the FSA has had with many firms have centered mainly on interest-only, which has caused much heated debate.
But she says: “We have not yet consulted on our proposals. I think there has been a lot of unhelpful speculation about this.”
The proposals will be included in its November consultation paper and she says the FSA will be happy to continue the dialogue before finalising its approach.
She also revealed that the FSA has been doing some supervisory work on forbearance strategies and, as well as the issue about an increased use of capitalisation, it has found other bad practice.
It has found some lenders extending the payment term into retirement without adequate consideration of the borrower’s ability to make interest- payments and eventual capital repayment in retirement.
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Readers' comments (13)
Robin Banks | 22 Oct 2010 11:45 am
MMR! She'll eat her words!
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Clarky | 22 Oct 2010 11:58 am
The market must be different in Cloud Cuckoo Land I guess.
When will these people start to listen to advice from people who actually know what the situation is?
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Anonymous | 22 Oct 2010 12:04 pm
"Processes can be gamed by brokers who know the rules" Talk about tar all brokers with the same brush, this comment is both derisory and insulting to the many brokers who through qualfications and training are considered to be professionals (apparently not in the FSA's eyes)
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Anonymous | 22 Oct 2010 12:11 pm
More smoke and mirrors's I'm afraid from the FSA. How could this Lady possibly know what the reaction of the Lender's will be in the face of draconian regulation and the threat of retrospective application of future rules? I'm fairly sure that most Lender's will simply just not take the risk. The mortgages would be refused and the CML research will be borne out in it's entireity.
The more the FSA try to defend their position, the less confident I am about the future. What future??
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Luke Atkinson | 22 Oct 2010 12:20 pm
Blackwell states ''An assumption has been made that if a mortgage is affected by any of our changes it is not granted at all. In most cases, however, the impact would be a change in the terms of the mortgage available and not the refusal of any mortgage at all.”
But surely its not just a question about the mortgage being granted, its about the terms that the mortgage is granted on being attractive and fitting the customers needs/wants??
Clarky you are right, when will these people listen to industry professionals?
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Anonymous | 22 Oct 2010 12:21 pm
Funny how the fsa say "brokers" mis use fasttrack, she should have a wonder into a Halifax or Abbey branch and see how things work in the real world. Actually its probably easier just to keep blaming the broker not the lenders who sent out bdms to actively encourage fast track
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Grey Haired Underwriter | 22 Oct 2010 12:23 pm
I believe that this lady has absolutely no mortgage experience at all and that she has only been with the FSA a short time. It's like the AA sending out a plumber to fix a car.
When will regulators learn that it is dangerous to play around with things that they just don't understand.
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Jonathan | 22 Oct 2010 12:27 pm
Oh dear, it sickens me to have to listen to people like her pontificating on how the mortgage market should be controlled. Who is she to decide what can and cannot be done. The FSA could have gone further she says and restrict LTV thresholds. They have gone too far already and ruining the whole market. I for one am getting out of this business as things will only get worse. There will be no place for small brokers.Indeed there will be no place for any broker. The FSA are the gestapo of the financial industry and it angers me as to how they get away with it. When everything was rosy in the garden they didn't object to self certs, sub prime, fastrack etc. Talk about U turns! A shower of power loving people will be the ruin of the housing and mortgage market. They should all be.....!
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Ian | 22 Oct 2010 12:27 pm
How are the people who took 85% ltv on interest only 2-3 years ago when it was perfectly exceptable going to be able to afford to convert the entire mortgage to arepayment with also the prospect of either having no job or reduction in salarys .
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Anonymous | 22 Oct 2010 12:36 pm
Thank god the FSA will not exist for much longer!! This demonstates the reasons why. Let's hope the new regulatory body will talk common sense and listen to the industry experts and not clowns paid to say yes. As a country we need to move forward and be able to do business that is good and sound for the customer, whatever the industry. Let's hope the new Government live up to their promises and allow business to flow, whatever the deal.
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