Mortgage regulation is going to change the way the market operates forever which is why this week I will to use this space to do what countless sourcing systems have refused to do and respond to the comments made by the august Michael Bolton of BM Solutions.
I'm sure Michael will understand why I'm replying through this magazine – in the same manner that he chose to address his letter to the sourcing systems, Mortgage Brain, Trigold, mortgageLink et al.
In my capacity as proprietor/publisher of the mortgageLink sourcing system which has been in operation since November 1986 I cannot of course speak for the other sourcing systems.
This is our 18th year of operation and since we started we have provided a daily update service for the mortgage criteria held on the mortgageLink database. The quality of the information we provide has persuaded the vast majority of the trade press and consumer publications to use our database as the sole source of their mortgage tables – indeed you will find we supply some of the information toward the end of Mortgage Strategy.
Shortly after we began operations we introduced the 'verified date' as one element of the product criteria. This was the last date on which we verified the product criteria with the lender but it was perhaps a double-edged sword.
A product may show a date of five days ago but some criteria may have changed in the meantime, while another product may show a date of 20 days ago and yet remain perfectly valid as nothing has changed in that time.
For many years we sent out printouts of the mortgage criteria to all the lenders and telephoned them at regular intervals to chase up any amendments. It must be said that most lenders have adopted a responsible attitude and helped us maintain the accuracy of the database to the best of our ability.
In contrast, some years ago a major lender (not BM Solutions) simply informed us that it didn't have the time to check our printouts and consigned them to the waste paper bin as soon as they arrived in the post. That same lender is now bleating on about the importance of the accuracy of KFIs on the sourcing systems.
We have had various broker queries over the monthly mortgage payment figures shown on the quotations produced by the mortgageLink system not being consistent with the figures produced by the lenders at the mortgage offer stage.
One notable example concerned a Midlands-based regional building society, when we were asked to explain the difference of around £4 in a repayment mortgage figure of £402 per month.
I had to make five telephone calls to the building society in question before it finally admitted that its figure was incorrect and that in order to reduce the loan balance to exactly zero at the end of the term it would need to adjust (downward) its quoted monthly payment figure.
On another occasion I was informed by one of the smaller building society that it didn't know how its own figures were calculated: “The computer programmer responsible left the society some years ago.”
There is then another band of lenders with their flexible mortgages who advertised the 'Aussie method' of daily interest calculations. Quite simply, it is a load of porky pies.
The only way we could reconcile the mortgageLink figures with the lenders' own figures to penny accuracy, was to use the monthly rest method for repayment calculations.
To cut a long story short the lenders may have been calculating interest daily but no credit was given for the monthly mortgage payment until the start of the following month. In my view, a quite deliberate and blatant piece of deception on the part of the lenders and a long way short of the FSA's mantra of 'clear, fair and not misleading' dealings with customers.
We have come to the conclusion that there is not going to be any fundamental change in the way we operate, or the co-operation we receive from the lenders. The latter always has and always will vary in quality from one lender to the next.
We have now reached a critical juncture in the development of the mortgage market and the sheer hypocrisy of some lenders leaves even an old cynic such as myself somewhat amazed.
I am also bemused by the lenders' interest in the accuracy of the sourcing systems.
From a lender's perspective, nothing has changed in the past 18 years, nor will it on October 31 in respect of responsibility. The lenders are not responsible for the KFIs (quotations) produced by the sourcing system, so why this new-found interest?
I would point out that Network Data currently spends around £500,000 a year on an IT department of 15 people that is largely focussed on the maintenance of the mortgageLink system, including a comprehensive program for the checking of KFIs.
The system provides a complete solution to the brokers' needs and as a matter of course produces the IDD, KFI and a suitability letter.
Returning to the debate about who is responsible for the accuracy of the product criteria, all the talk about 'traffic lights' or data 'verified by the lenders, which I touched on above, is an absolute red herring. It does not remove the responsibility from the broker as set out in the MCOB rules.
Nevertheless, Network Data is now introducing a 'guarantee of accuracy' (see box on this page) which removes this responsibility from the broker's shoulders. This is a unique commitment on the part of a sourcing system – no other system does or is likely to provide this guarantee.
It must be said that the phrase 'guarantee of accuracy' is a misnomer in that there will always be some element of inaccuracy simply due to the sheer volume of mortgage criteria and the rate at which it changes. No sourcing system has eliminated human error and none is likely to.
What we are doing is effectively underwriting the accuracy of the data and making a commitment to paying up in the event that there is a mistake. We will shortly be producing a document, or charter, that will set out our commitment in some detail.
I hope this provides the broker community with the comfort of our total commitment to, and confidence in, the quality of the mortgageLink system.
Guarantee of accuracy
Sourcing system: mortgageLink
Guarantee: Any inaccuracies that cause loss of money to the client will be reimbursed by Network Data Conditions: This guarantee is only available to ARs of Network Data