For mortgage intermediaries seeking direct authorisation by the FSA the discount period may have come and gone but a far more important deadline now looms large on the horizon.
The FSA has, by statute, six months to vet an application so firms not sending their applications in by April 30 this year risk being left out of the market come Mortgage Day.
In the past, when regulation has come to a new part of the financial services market there has been a 'grandfathering' or run-in period whereby firms were given up to six months to put their systems in place so as to comply with the regulator's requirements.
However, this is not to be the case for mortgages. The FSA takes the view that it has given the industry a clear year to prepare for regulation and that that is time enough. It is true that the FSA published the mortgage final rules last October but working through the practicalities of how they will be applied has been rather like peeling an onion – another layer emerges every time intermediaries think they have mastered an issue. This is often caused not directly by regulation but by its commercial realities.
An example of such an issue is commission disclosure. MCOB is specific about what should be disclosed and what need not be. However many lenders take the view that all the payments they make to regulated firms will appear on their Key Facts Illustrations.
This could mean that customer receives contradictory information while the lender and intermediary both feel they have discharged their regulatory responsibilities. We are tackling this issue at AMI – our job is not just to lobby on the introduction of regulation but also on how it actually gets applied in the market.
It is worth noting that the statutory six months the FSA has to process an application runs from receipt of a complete application. If a firm doesn't take the form seriously, rushing it and making mistakes, the FSA can reject it or seek extra information.
This can delay the application being processed and, much more importantly, delay the firm receiving its FSA approval or Part IV permission, as it is catchily known in the trade.
In the run-up to the end of the discount period the AMI helpline was red-hot with member queries about both the form and the application process. I believe we were able to answer every member's query or point them in the right direction. We are now gearing up for an end of April rush as those who needed more time focus on the next deadline. This service is free to members (and I've been told is worth the membership fee alone).
AMI is decidedly neutral about the path members take through regulation. It has always been one of the strengths of this trade body that we represent the whole of the mortgage market. Indeed, this is why we have become recognised as the voice of the industry in regulatory circles.
So although we can help with direct authorisation, we are equally happy answering members' questions on networks.
Let us never forget what Oscar Wilde said: “The only thing to do with good advice is pass it on. It is never any use to oneself.”
Intermediaries planning to seek direct authorisation should now focus on the April deadline. The discount period may have ended but there is still time to buy the FSA 'insurance policy' of receiving direct authorisation.
Members will be aware that we are now entering the election season. This is the opportunity for AMI members to stand for election to the board of their trade body.
The board is responsible for all policy matters so if you want to play a leading role in how your industry is being shaped, why not contact us and find out more about what it means to become an AMI board member.
I should know but I don't know
Q: I passed the CeMAP exams to comply with the MCCB's requirements. Will I need to take new exams when the FSA takes over regulation at the end of October?
A: In August 2003, FSA published CP194 which dealt with training and competence requirements for mortgage intermediaries. The recently issued Policy Statement 04/10 sets out the FSA's thinking.
Intermediaries who have already been assessed as competent under MCCB requirements will be 'grandfathered' into the new FSA regime for the purposes of training and competence.
The FSA has passed responsibility over to the Skills Council so it is the latter's role to ensure appropriate exams are in place in time for the start of mortgage regulation. This relates to advisers who will be new to the role.
Once mortgage regulation starts, an intermediary newly training to advise on standard mortgages must take an appropriate exam within two years. The same timeframe will apply to those training to advise on lifetime mortgages, oversee the sale of lifetime mortgages or design scripted questions for use in non-advised sales of lifetime mortgages.
An intermediary who has previously qualified to advise on standard mortgages and is now seeking to do any of the activities related to lifetime mortgages will also have two years to pass the additional module for lifetime mortgages.