No-one can accuse the FSA of springing surprises on the firms it regulates and, true to form, Spink went on to flag up the three areas the regulator is now concentrating on. These are sub-prime, self-cert and affordability.
Sub-prime is being scrutinised as part of two separate reviews. First, under the Mortgage Effectiveness Review, the Mortgage Conduct of Business rules are being examined to see whether they are delivering their intended benefits to clients. The second stage of this review is looking at areas that pose the greatest potential risk to consumers, which include sub-prime.
The second review is the FSA’s thematic work, part of which is focussing on the policies and practices surrounding the sales process for sub-prime mortgages and whether they are meeting the Treating Customers Fairly initiative.
The self-cert research project follows up 2005’s visits and mystery shopping exercises. Their results showed bad practice on the part of many brokers.
Some 36% of files showed either no reason or unclear reasoning for recommending self-cert, with 42% of the sample comprising employed applicants. In most cases no reason was given for using the approach. And 47% of the files re-viewed showed that brokers had not assessed affordability properly. The current review – due to report in September – will find out whether the situation has improved.
The third key area under review, affordability, arises from January’s Quality of Mortgage Advice Processes project, which showed that about half of the brokers investigated did not assess the issue adequately.
The review will scrutinise three areas – whether mortgage brokers know how to assess affordability and if TCF is being delivered by such assessments, plus instances of good and bad practice to create benchmarks.
No doubt the industry is grateful that these areas have been flagged up, but what about engaging with the FSA’s communications?
Spink was clear that the regulator is looking for a two-stage engagement – first, firms reading its information and second, acting upon it by making the necessary changes. However, for many ordinary mortals, simply finding the information on the FSA’s website can be a frustrating process.
There’s no doubt that the website contains mountains of information and features every possible publication that firms need to run their businesses compliantly, but the pathways to what they need aren’t always clear and sometimes persistence is required to find the relevant data.
Here’s one example. I wanted to find a copy of the speech in question and typed ‘Mandy Spink’ into the website’s search facility. This yielded nine results, which had 51% relevance to the topic. I’m no statistician, but surely any result containing those two words is 100% relevant, whereas if it only contained the word ‘Mandy’ it would be 50%?
Undaunted by these identical indicators, I sorted the search by date order, expecting to find what I wanted at the top. Unfortunately, this gave me a list headed by an item from 2006, followed by one from 2005, with my 2007-dated entry at number four. Luckily, there were only nine items so they all fitted on one page.
Had the search produced more results – for example, TCF brings up a list of 264 references – the task would have been even more time-consuming.
Tackling the job from a different angle, persistent searchers could try the small firms and mortgage advisers section of the website, on the grounds that Spink directed her speech specifically at them. I expected to find a link to it in this dedicated section, but to no avail.
Communication is a two-way street, so if the regulator’s website team could carry out reviews of its own to discover ways to make the FSA’s information easier to access, it would allow the industry to engage with it more effectively.