In the findings of the second stage of its Mortgage Effectiveness Review published today, the FSA says that its research into consumer experiences of arrears handling indicated areas of non-compliance.
It plans to undertake focussed thematic work on the arrears management practices of firms to establish whether such a breach is occurring, with results of the review expected in June.
The FSA says it hopes that the review will help inform it about the wider mortgage regime and its plan to move towards principles-based regulation.
Dan Waters, director of retail policy and themes at the FSA, says: ““The Mortgage Effectiveness Review is an integral part of our programme of work on mortgages and will help shape the future of our mortgage conduct of business regime.
“It sits alongside our thematic work and close supervision of individual firms, and forms part of the balanced and proportionate approach we are taking to ensure the fair treatment of consumers.”
The Effectiveness Review has been designed to measure whether the FSA’s mortgage conduct of business rules are delivering the intended benefits for consumers.
The first stage was published in 2006 and focussed on disclosure and advice and selling practices in the mainstream mortgage market. The second stage, out today, focuses on sub-prime and lifetime mortgages.
The FSA’s findings reveal that brokers are central to the sub-prime and lifetime markets
The findings show that sub-prime and lifetime mortgage consumers focus heavily on price, with sub-prime consumers particularly interested in initial payments.
The findings also show that both sub-prime and lifetime consumers see the Key Facts Ilustrations as an important and useful document for helping them to check points of detail and clarify uncertainties, but not for product comparisons.
Further, the findings show that consumers do not differentiate between different levels of advice, particularly information-only advice, and that Initial Disclosure Documents do not prompt them to consider the level of service they may receive.