The past year has tested the resolve of many but the common view is that the industry has made good progress under Financial Services Authority stewardship, with the more doom-laden predictions proving untrue.
But big issues still lie ahead. Of course, they do rather depend which side of the fence you are on and the type of business you operate in, but several spring to mind:
- Can lenders who have worked overtime in producing exciting products offer the levels of service to match their flexibility?
- Will lenders consider moving to trail income to allow brokers to build embedded value in their business?
- Could lenders offer servicing rights to brokers to allow them to service a mortgage over the term of the loan?
- How will affordability calculators be seen if there is a significant interest rate rise?
- Will advisers and lenders understand and apply Treating Customers Fairly?
- Can a KFI be produced that is short enough to ensure it can be easily understood by a consumer?
- Is the creation of a plethora of overseas property funds instigated by non-regulated property developers an accident waiting to happen?
- With the continued growth in foreign mortgages and overseas property purchases, will this sector require greater transparency?
- And will brokers who struggle with the complexities of selling MPPI and critical illness have the knowledge and skills to advise on pension term assurance?
Some may consider these issues trivial but to others they are real concerns. And if there’s one thing we should all learn, it’s that we should not underestimate the determination of the FSA to flex its muscles.
November 2004 marked a milestone in the industry with the Financial Services Authority taking over statutory regulation of mortgages for the first time.
Previously, the Mortgage Code Compliance Board had set guidelines to follow, albeit on a self-regulatory basis. After Mortgage Day, the FSA formalised the required structures and best practices and set in place new requirements for financial prudence and reporting procedures.
The most noticeable change is that requirements and procedures are now legislated for rather than being self- regulatory, and reports are now required every six months whereas previously, none were needed.
My firm still follows best advice in presentations to clients and consultants are still subject to regular observations and have to fulfil training and competency requirements. As always, records are kept as required. Also, our complaints and advertising procedures remain as they were, though the requirements have changed slightly.
On the front line, the practice of broking has not changed dramatically, though documentation has become easier to compare and more reader-friendly for clients.
Regulation has helped boost consumer confidence, as the mortgage industry has become a more professional environment.
The biggest changes have been from a reporting and record keeping standpoint, both for individual businesses and for the industry as a whole. Now everyone must report on their activities to a central point where the facts can be collated. These facts give the FSA the information it wants to police the industry and ensure compliance with the legislation.
But for my firm, the change has not been difficult to implement as we have always worked to regulated systems.