The Financial Services Authority’s Mortgage Market Review has caused quite a stir in the mortgage industry and there is no doubt there are going to be changes to mortgage legislation at some point in the medium term.
We listened with interest to one of our competitors in the bridging finance industry banging the drum for regulation at the recent Mortgage Business Expo, which was held in London.
It was predicted with gusto that there would be regulation of the buy-to-let market in place by next year’s Mortgage Business Expo.
It was said this would be good for the market as it would weed out unscrupulous operators.
Obviously, the lender in question is regulated so it would serve their commercial pursuits for buy-to-let to become regulated.
But as the FSA’s recent investigation and subsequent fining of Bridging Loans shows, simply regulating a company’s activities provides no assurances that it will act appropriately.
The regulator acknowledges that the MMR is going to take time and that some of the proposed changes may not even come about.
It recently commented that “we think that much of what we are proposing is consistent with how lenders themselves have already tightened up their procedures following the recent downturn”.
The FSA spokesman went on to say that “we will not rush into change without fully assessing the impact of our proposals on the mortgage market”.
The comments highlight an important point – that much of the proposed regulation covers items that most lenders already adhere to whether prescribed by legislation or not.
If a lender intends on staying in the market for the long term, then things like Treating Customers Fairly are obviously an important part of a sound, long-term business strategy.
There is also a concurrent review of the European mortgage market being conducted by the European Union.
The FSA’s recent fining of a lender shows that simply regulating a firm’s activities provides no assurances
Back in 2005 the European Commission started a review on the integration of the EU mortgage credit markets.
This work has also involved various working papers on issues such as responsible mortgage lending and borrowing practices throughout the EU.
Again, there does not seem to be a definitive timeline for when the review of the EU mortgage market is likely to be concluded.
It seems that if the UK government was to receive a proposal from the FSA for the MMR in the near future, there would be at least some consideration given to what would be the outcome of the review of the EU mortgage market as a whole.
Looking back at the Conservative Party’s 2010 election manifesto, one of its key objectives for business was to cut red tape and end the culture of tick-box regulation.
Although, now of course we have a coalition government, which may also cause delays in working out a legislative position on the MMR that will be acceptable to the backbenchers from both coalition parties.
We will see how things evolve on the regulatory front next year, but it is my bet that we will see the Olympics in London before we see the buy-to-let market being regulated.