I was reassured last week following the publication of the Association of Mortgage Intermediaries’ response to the Financial Services Authority’s recent Mortgage Market Review discussion paper regarding potential reform of the market.
AMI’s response reinforced what many of us have been saying since the MMR was published but hopefully it will carry more weight with the regulator.
It is obvious that many brokers are seeing an improvement in the market generally and that volumes are increasing, so it is important that any measures that are imposed by the regulator add value and do not crush the life out of the fledgling recovery.
The most important areas AMI focusses on are affordability, product regulation and self-cert. In the MMR the regulator seems intent on continuing with its nannying approach by treating consumers as hapless fools led by the nose by unscrupulous brokers, with a suggestion that lenders should ultimately be responsible for judging affordability.
While it’s perfectly reasonable for lenders to ensure their customers can afford their mortgages it is not practical or desirable to penalise lenders if borrowers default.
Of course, lenders should ensure appropriate checks on affordability are undertaken at the outset but there must be some recognition of the responsibility of consumers too.
There is still a possibility that the regulator will move to restrict debt consolidation and the amount of equity borrowers can withdraw. Neither would be helpful or practical.
Such an initiative would only serve to stifle innovation and penalise responsible borrowers. After all, if lenders have the correct systems and controls in place any decision to lend in these areas should be made following a commercial and risk-based assessment rather than driven by a cap screwed on by the regulator.
AMI also shines a spotlight on the FSA’s lack of understanding regarding the difference between self-cert and fast-track mortgages, as it continues to treat both products as essentially the same thing.
While I don’t think any of us would disagree that self-cert went way beyond its intended remit, killing it off would be a mistake. Restrict it certainly, but it still has a part to play in the market and the risks it brings can be overcome in other ways.
If self-cert mortgages were limited to the self-employed with a maximum LTV of 75% and appropriate affordability checks, the product would still have a place and the risks would be manageable.
Equally, not all borrowers pose the same level of risk to lenders so some checks could be minimised. This would allow a faster process with no increase in risk, making sound commercial sense.
Any move to throw out the fast-track baby with the self-cert bath water would remove a valuable and commercially-viable facility. There would be no benefit in layering lenders with additional bureaucracy.
So this response is a good example of the work AMI does for the industry and the influence it has with both the regulator and the Treasury. We should all do our bit to support it.
SALES AND MARKETING DIRECTOR