Having already covered self-certification in two previous articles, I did not expect to be covering it once more. But the recent BBC The Money Programme investigation revealed the misuse of self-cert and alleged that some advisers have been recommending that clients falsify their income in order to obtain a bigger mortgage loan.
I have strong feelings on the self-cert issue and, while I see a need for it in certain forms, I am sure I am not alone in condemning the events allegedly exposed by the BBC's undercover investigation team. Following the programme the MCCB quickly announced that its compliance team would be launching an investigation to establish whether there were any breaches of its Code. And rather more seriously for those alleged to have been involved in such a fraudulent practice, there is a real risk of a custodial sentence at Her Majesty's pleasure.
On a smaller scale we have also learned recently of the Mortgage Code Arbitration Scheme's award of £12,000 against a firm which relied on the information contained within a sourcing software package. This award was made as the firm was found to be in breach of its commitments under the current voluntary code of mortgage conduct.
These two events have provided us with a timely reminder not to become preoccupied with the choice of direct authorisation or appointed representative status. We still have just under a year remaining of our commitments and obligations under the Mortgage Code. Underlying the principles of the Code – and indeed the incoming statutory regulation – is an adviser's inherent obligation to be fully responsible for the advice they provide. We can all cite pressure of targets and the need to earn a decent income but we should not forget that the service and advice we provide should be compliant. Under no circumstances will lack of knowledge or understanding of the Mortgage Code provide a valid defence if we are found to be in breach.
Obviously anybody who provides Level 3.1(a) advice and recommendation as to a suitable mortgage product must be appropriately qualified. My concern however is that many advisers actually passed the CeMAP and MAQ qualifications some time ago. I wonder how many have felt the compulsion to pick up any mortgage-based learning materials since. Have you looked at your at your compliance manual recently?
My advice for anybody looking for a quick refresher on the Mortgage Code is to look no further than the website www.mortgagecode.org.uk.
In the 'Industry' section of this site you will find 'Good Practice Notes' containing an invaluable document: 'The Mortgage Sales Process Guide'. This guide sets down the minimum standards all mortgage advisers should uphold. The site breaks down the sales process into five areas:
Introduction and overview of the Mortgage Code
Identification of the customer's needs
Provision of relevant information to the customer
Identification of products then to be discussed with the customer Mortgage suitability letter/report.
Rather usefully, it also contains a list of the 12 most common failings under the Code on which list you will see that the breaching of Code sections 3.1 and 3.2 are recurring features. Your full knowledge and understanding of these sections of the Code are imperative – and a good starting point to help you avoid the pitfalls into which many of our colleagues have stumbled.
The site also offers examples of Code-compliant mortgage documentation. For anyone not yet visited by an MCCB compliance team it is worth comparing your documentation with the example fact find, provision of information checklist, terms of business, and guidance on areas to be covered within your product confirmation letters. You should remember however that the examples shown are of minimum standards and if yours do not cover at least these areas you will be in breach of the Code. I make this point in particular reference to fact find documents – clearly, one page of A4 does not cover all the areas you will need to discuss with the customer.
Nearly 2,500,000 page impressions in September