Southern Pacific Mortgage Limited (SPML) recently polled its packager base on the regulatory issues raised by CP146.
Results were analysed in two groups: packagers dealing both with advisers and public, and those who only deal with advisers (a roughly 50/50 split).
Regarding the pending December 31 deadline for adviser qualifications, the survey found that, although only a quarter of respondents believed that 75 -100% of advisers had already passed the first paper of their chosen exam option, well over half (54%) believe that 75-100% of advisers will be fully qualified by the 31 December deadline. Among packagers that do not give advice themselves, it was felt by 45% that their adviser base would diminish after January 1 2003. This degree of reduction could potentially affect consumer choice, so it may need to be monitored in future.
The survey also showed that packagers had concerns about the timetable for the implementation of regulation. However, here, results from the two groups showed quite a wide variation. Packagers who also give advice were much more confident about meeting timetables than their non-advising counterparts. The first group showed 42% feeling confident that they would meet the individual authorisation deadlines, and more than a third confident that 6-9 months would be enough time to prepare for full regulation, once the final rules for the selling process have been published. Of the non advice-giving packagers, only 14% were confident that individual advisers who they deal with would meet the authorisation deadline, and only 16% believed enough time was being allowed to prepare for implementation. However, the fact that neither group had a majority believing that timescales were adequate supports our own view that more preparation time may be necessary.
On the subject of sourcing Pre-Application Illustrations (PAIs), across both groups two thirds of the market said that producing their own PAIs was the least favoured option. The two most popular options for sourcing PAIs were online databases/ search engines, and lenders' own computer operating systems. This indicates that the cost of regulation for smaller firms may be too onerous and, and they may consider leaving the market rather than commit to substantially increased overhead costs.
Regarding the FSA's proposed three categories of “advice” (fully advised sales; non-advised sales with filtering questions; and non-advised, execution-only sales) more than two thirds of all respondents believed that they and their feeder advisers fitted into the 'fully advised sales' category. Between two thirds and three quarters also felt that these three categories adequately cover the whole market. However, the fact that the remainder feel that there is room for further definition would indicate that this area may need further consideration by the FSA.
On the subject of the FSA's proposed “high-risk” mortgage categories: bridging loans; flexible loans with drawdown; and equity release (now termed 'lifetime mortgages'), both respondent groups agreed with all three high risk categorisations, but to varying degrees. Levels of agreement on the “high risk” definitions were lowest concerning flexible/ drawdown mortgages (54-64% agreement), and highest regarding equity release (70-75% agreement) – perhaps reflecting the greater overall familiarity of flexible products in the market, as opposed to equity release ones.
Stuart Aitken, SPML's director of credit, says: “In the past, the official response from brokers and packagers to regulatory consultation has been extremely low. All of our applications are packager introduced, so we needed to take their views into account when responding to CP146. We have surveyed packagers for their views when making our previous responses to regulatory consultation, and this has become even more important as the final rules are now being shaped. It is crucial that the voice of the packager and broker is heard and I would urge them all to ensure they make their feelings known to the FSA. Our survey has given us some very useful information that we have fed into our own CP146 response.”