Labour MP horrified by MMR

1 February 2011 | By Natalie Thomas

Labour MP George Mudie says he is horrified by the Financial Services Authority’s Mortgage Market Review and believes the regulator has lost its balance and could damage the industry.

Speaking at a Treasury Select Committee meeting this morning on competition and choice in the banking sector, TSC member Mudie says he thinks the MMR would damage the mortgage and house building sectors.

He told the committee: “I am horrified by the MMR. I think the FSA has lost its balance, to guard against “you were weak and are still weak”, they have swung the other way and they could damage the building industry and the mortgage industry and young kids getting a new house because of all the regulations.”

He asked Graham Beale, chief executive of Nationwide Building Society, whether the FSA was micro-managing regulation and whether it was not the job of the borrower and the lender to assess risk.

Beale told the TSC: “I don’t think the FSA did a full economic assessment in terms of understanding the implications of the MMR and what it would do to the ability of borrowers in the UK to borrow from banks or building societies.

“When it eventually did, it realised there were a lot of unintended consequences, which is why it has now gone into consultation with a view to get something that is more pragmatic.

“It will now hopefully achieve some of the extra safeguards it intended but not undermine the market.

“The FSA is right in wishing to eradicate the state of the mortgage market prior to the crisis where the lack of constraint around lenders like Northern Rock led to 125% LTV mortgages and lending against high loan to income multiples.

“This went beyond the relm of reasonable responsible lending and its right we don’t have an environment where this could repeat itself.”

But Mudie replied: “I think the scheme seems far from that and seems almost personal and would rob building societies of any discretion in terms of individual customers.

“It is one thing building a mortgage book up of doubtful loans but another taking a chance on a young couple that are in work but cannot get a deposit.”

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Readers' comments (22)

John Chedozie | 1 Feb 2011 4:05 pm
He's horrified is he? Well, he's not alone thats for sure.
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Luke Atkinson | 1 Feb 2011 4:12 pm
I find it ironic a member of the party that bought about the beast is now condeming it and asking for it to be reined in. The story of Frankenstein comes to mind.

Nothing will change, the FSA will bring in MMR, they will continue to ignore the concerns of industry professionals and hammer the final nail into the coffin of an already doomed industry.
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Kevin friend | 1 Feb 2011 4:32 pm
Welcome to the fold! A little late but you are a Labour MP. Have a chat with Mark Hoban when you see him.
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david | 1 Feb 2011 4:38 pm
This government has said time and again that they are going to get rid of the FSA. It's sad that it has taken a Labour MP to voice the concerns that most of us in the industry have. We managed perfectly well under the MCCB and indeed before that.In fact look at where we are under the rule of the FSA - the biggest financial mess this country has ever been in! A mortgage is basically a simple product, however, under New Labour's regulator we have made it into a product that requires the IQ of a brain surgeon to fully understand it. The risk lies with the lender and it should be their decision whether to lend or not!
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David | 1 Feb 2011 4:41 pm
I agree - the big axe is already in its arc of falling - nothing short of a govt repeal will stop it now, and despite all the blustering will anyone step in the axe's way ?? The damage to the UK will not be realsied for 2 - 5 years and by then it will be too late - lets build more houses they will say - by whom all the carpenters and bricklayers are now in cosy call centres - not offering debt advice of course as they canned funding for that too !
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Anonymous | 1 Feb 2011 4:42 pm
I find it difficult to believe that its taken so long for MPs to smell the coffee. There has been plenty of industry comment regarding the FSA that should have been picked up by these people. The FSA were asleep at the wheel and the current approach is just a knee jerk reaction at best and, if seen through, has the potential to destroy our industry.
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Alan Campbell | 1 Feb 2011 4:43 pm
I agree that nothing will be done about MMR and that the FSA will get its way. That is unless we as an industry get off our backsides and start a campaign against it. The first thing that should happen is that the mortgage networks should take a strong united stance and push Cameron, Osborne and Cable into stopping it in its present form. The second thing is that we, as mortgage brokers, should stop moaning about it and also adopt a united stance. We should also take action by writing and emailing our members of parliamen, as well as the PM and members of his cabinet. What about then, are we going to sit back and watch our livelyhoods disappear or are we going to take action.
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Colin Chapman | 1 Feb 2011 4:51 pm
With the onset of the credit crunch over the last 3 and a bit years the lenders have pretty much made happen what a large part of MMR is all about. Self cert has gone, 125% gone, self cert sub prime gone, sub prime...a small pulse exists.

All the FSA really need do is prudently manage the products available when liquidity returns, ie no self cert, no 125%. and not delay on the registration of every broker
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Paul Violet | 1 Feb 2011 4:53 pm
Spot on. It's not in the nature of the beast to listen. It will battle on regardless, proving yet again that it naver has been and never will be fit for purpose. How on earth it was ever allowed to wreak the havoc it has is beyond me.
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Anonymous | 1 Feb 2011 4:53 pm
The Northern Rock's problems were not caused by bad lending but by the securitisation of the loan book. I wonder if any one has asked how many of the 125% LTV and high income multiple mortgages went into default? I think you will find surprisingly few. But on this they hang the whole industry. The mortgage mkt should be dynamic, flexible and competitive- not restricted as is proposed. Surely the lender in the free world be allowed to make commercial decisions as who to lend to and on what terms
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