This will, indirectly at least, have an effect on mortgage packagers and distributors, many of whom complain they are already having to act as regulatory gatekeepers when it comes to TCF.
In one conversation I had with a distributor this month, I learned staff regularly had to suggest to mortgage intermediaries that the product they had selected for their client may not be the most suitable.
The distributor would then suggest another product that might suit the broker’s client better, and to some extent have to attempt to persuade the broker of the benefits of one product over the other.
The difference between the products was invariably that the procuration fee offered by the original product was higher than the product recommended by the distributor. This is not an uncommon problem for distributors, but it puts them in a precarious position.
While the distributor in question believed that by acting in this way with the broker it was simply doing its job properly, doing so takes it very close to the point of providing advice. This is another example of distributors finding themselves operating in one of the grey areas of the mortgage market and FSA-regulated activities, and while many distributors are already regulated, it is unlikely many of them – particularly those that are not regulated – are comfortable with it.
It might then be timely that John Rice, managing director of the Regulatory Mortgage Packagers’ Association, along with Stephen Atkins from Freedom Finance, Jonathan Cornell from Hamptons, Ian Graham from Platform, Gavin Hunt from Kensington Mortgages and Phil Jay from BDS Group, among others, have struck out on their own and created the Mortgage Compliance Forum, which held its first meeting this month.
The MCF says it wants to bring together lenders, intermediaries – whether directly authorised or appointed representatives – distributors, networks and clubs to create a broad base of support to influence future possible regulations handed down by the FSA.
The organisation also wants to improve relationships between lenders, intermediaries and regulators, and help develop treating customers fairly and principle-based regulation strategies.
It is to be hoped the MCF is successful in its stated aims, and Chris Cummings, director general of the Association of Mortgage Intermediaries, says his association is broadly supportive of any organisation that seeks to help its members adhere to FSA rules and influence future regulation. Cummings says AMI would also be a willing participant of the MCF.
Whether the MCF will have a great deal of influence over FSA policy is doubtful. It is more likely that AMI is better placed to do this, but given the current climate, and the general belief among most that distributors should become regulated – and for some this could not come soon enough – such a group may turn out to be a good thing.
Certainly how firms, wherever they sit in the mortgage chain, treat their customers is going to become increasingly important, so developing an understanding of what the FSA means when it talks about TCF is probably going to be helpful for many distributors.
After all, quite how lenders hadn’t realised they were going to get caught out by TCF over mortgage exit fees is something of a mystery to me. Surely they should have been able to work out that increasing exit fees without giving their customers fair warning wasn’t exactly fair. It would be nice to think that an organisation such as the MCF could help its members avoid similarly obvious pitfalls, especially if, as many hope, the FSA launches a consultation on the regulation of packagers later this year.
Matthew West, editor, Mortgage Distributor