The FSA - this time it's personal

Lending Strategy 01 November 2009

I do not usually use this column for personal revelations but believe the time is right.

My desire to make a clean breast of things is prompted by the Financial Services Authority’s Mortgage Market Review. I have often written and said things about the FSA which may be capable of being interpreted as negative, and the FSA has obviously decided to get its own back.

It’s clear to me that I am being singled out for harsh treatment in its latest discussion paper. I only hope that not too many others form part of the collateral damage which could be inflicted as the FSA tries to teach me a lesson.

And the problem? Were I to decide to remortgage I don’t think I could get a deal at the moment as a result of market conditions. Now the FSA, which clearly knew that one day it would have the last laugh, wants to embed my inability to get a mortgage into the rules that will govern the market from now on.

Here’s the thing. I took out a mortgage in 2007 and at that time had a healthy margin of equity which got me a good deal. And now? I daren’t even imagine what my house is worth.

I suspect I would be in for a nasty shock. My LTV will have taken a bit of a backward step and the one positive that could come out of the discussion paper is that the FSA concludes that regulating LTVs would be a blunt tool.

It says there is little relationship between these measures and the ability to repay a loan. Rather, it suggests that of more importance is the “proper assessment of affordability at an individual level”.

So far, so good, you might think.

But there are also suggestions that the FSA may be looking to prohibit loans to borrowers exhibiting what it calls “multiple high risk characteristics”. So having softened me up, this is where it hits me.

The abovementioned characteristics include high LTVs - somewhat contradicting the view expressed when looking at them in isolation - interest-only mortgages, self-cert, capital-raising (it seems it was not for the conservatory at all but rather an indicator of financial problems), unstable or uncertain future income and an impaired credit history.

This heady mix will sort the wheat from the chaff.

I am self-employed. I started my present business in late 2007. On accountancy advice and for solid tax reasons the timing of my first financial year was influenced by wishing to scoop up my business set-up costs, resulting in a modest loss.

My second full financial year - I’m only in year three now - showed a decent profit but, alas, I only have one year’s accounts. Year three has been much better but I can’t prove it and won’t have the accounts available until this time next year.

But the FSA believes that “there is no reason why the self-employed or contract workers should not be able to verify their income”. It is therefore calling for income verification in all cases. What am I to do? And pity those in a similar position but stuck on an above-average SVR.

This is the next time bomb. There must be thousands who have come off sub-prime fixed rate deals onto SVRs which they can manage at the moment but who will have nowhere to go when rates begin to creep up.

So I probably have an unhelpful LTV, I can’t access the best deals and being self-employed I have an uncertain or unstable income with no means of proving my current earnings.

I’ve been a solicitor for almost 20 years and now have my own firm but it seems the FSA thinks that by preventing me moving my mortgage it will expunge the excesses of the market.

That’s why I can only assume that I am the intended target of these proposals and that it’s payback time for all the mean things I’ve written about the FSA in the past. Either that or it has failed to understand large sections of the mortgage market, and that couldn’t be right could it?

Philip Tebbatt is principal of niche financial services law firm Slater Rhodes and can be contacted atphilip.tebbatt@slater-rhodes.com