Anyone who handles a lot of background reading in their job – which includes all personnel within mortgage and general insurance firms who are concerned with compliance – develops a knack of screening out non-essential topics from their minds.
My bet is that until now, for the vast majority of such people, the words ‘European mortgage legislation’ have caused eyes to glaze over and brains to cease functioning. But like it or not we have to turn our attention to these issues and to help us the Financial Services Authority has introduced a section on its website dedicated to how its European work on mortgages has progressed and how it aims to influence outcomes. To access this information, see the link to ‘what/ international/EU/mortgages’ in the ‘about us’ section of the regulator’s website.
The first point to understand is that the EU’s desired outcome for any intervention in retail financial services – in which mortgages play a key role of course – is the removal of barriers so that customers can shop around all over Europe for the best pensions, investments, savings and mortgages. For lenders, these barriers include difficulties surrounding access to cross-border consumer credit data, no international valuation standards and no overall European land registry.
A discussion paper was issued in July 2005 asking for views on proposals to harmonise such matters as advice standards, APRs and mortgage contracts. From all the responses to the consultation paper, a paper containing proposed legislation is expected to be published in the first half of next year.
As can be seen on the FSA’s new web pages, although it welcomes the European Commission’s work on examining the barriers to integration in European mortgage credit market, the UK regulator is not backward in putting forward its views on where priorities should lie.
Briefly, the FSA and the Treasury have asked the EC to take another look at its goals and have suggested some new priorities. The first of these is better enforcement of existing directives that could help lenders undertake cross-border activity if all member states would implement and enforce them. Second, it suggests that there are better alternatives than regulation to achieve the desired goals. The examples cited are market-led initiatives on mortgage funding and the sharing of consumer credit data, and the European Land Information Service, which is a cooperative venture between national land registries that has created a portal which allows worldwide access to electronic land title registries.
As the UK strives to achieve better regulation by simplifying rules and moving to a principles-based approach the FSA and the Treasury are urging the EC to make sure that any proposal is subject to a cost-benefit analysis.
In addition to these recommended European priorities, since the UK’s responses to the discussion paper have been submitted the FSA and the Treasury have worked together to promote the UK’s views and priorities to the EC and the European Parliament.
These include exploring ways to improve the efficiency of mortgage funding arrangements, increasing cross-border access to consumer credit data while maintaining data protection standards, developing common valuation standards and raising confidence in repossession procedures while maintaining consumer safeguards.
The EC is also reminded that the cultural, traditional and language differences in national markets are not likely to be addressed through intervention and that such legislative intervention can have costs that outweigh the benefits. On the subject of legislating for compulsory advice on every mortgage the FSA’s view is that an integrated market does not necessarily mean that it should be mandatory for all customers to get advice.
The FSA web pages referred to here are designed for mortgage industry readers. News items of interest will also be posted on them as they arise.
If we are sometimes tempted to think that the FSA is a sort of secret policeman waiting to pounce if we step out of line, it is useful to understand the regulator’s role in safeguarding the interests of the UK mortgage market and its stakeholders on the European stage. We can then better appreciate the benefits of having the FSA as a champion of our national interests at such a crucial stage in the development of the European mortgage market.