The disclosure documents needed for compliant mortgage and general insurance sales have grabbed the headlines from the early days of regulation through to contemporary developments. The Initial Disclosure Documents are relatively straightforward, with clear examples to follow and little room for doubt provided firms have clear policies relating to refunds of fees, for example.But Key Facts Illustrations have provided plenty of material for debate. Would lenders get their online KFIs up and running in time for Mortgage Day? Would sourcing systems have to take responsibility for correct KFI information? How many pages long should the document be? And how easy would it be to produce a combined mortgage and general insurance KFI? These topics are still to some extent unresolved and the debate continues. Rounding up some of the most recent developments will illustrate what I mean. It is still far from plain sailing when it comes to lenders making reliable and accurate online KFIs available to mortgage advisers and, as I write, Cheltenham & Gloucester has taken its KFI facility offline pending the redesign of its website. Regarding the availability of compliant combined mortgage and general insurance KFIs, there are still claims that glitches occur in those from the major sourcing systems. Disclosure documents – and KFIs in particular – have been the subject of a flurry of research. The Association of Mortgage Intermediaries conducts regular research among members. Its July survey covered the topic of KFIs and the issue of responsibility for their accuracy. The majority of those surveyed (52%) said their favoured method of generating KFIs was through sourcing systems, 35% preferred lender websites and 12% preferred to produce the documents internally. Unsurprisingly 57% of respondents felt sourcing systems should be responsible for the accuracy of the information provided in KFIs whereas only 38% felt lenders should be responsible. At the moment, lenders are responsible for the accuracy of KFI information but this clearly does not reflect the needs of the marketplace, where 50% of business flows through intermediaries. The FSA’s stated objective is to protect consumers without unnecessary detriment to the efficient running of the markets it regulates, so there must remain some room for a better allocation of responsibility to meet intermediaries’ needs. At the beginning of August the Intermediary Mortgage Lenders Association published the results of a membership poll that included the subject of KFIs. This showed that 86% of IMLA members believed KFIs have not helped, nor made any difference to consumers and their approach to the mortgage process. Although KFIs undoubtedly improve transparency to the consumer, it was felt that this did not increase borrowers’ shopping around activity. If disclosure documentation is about getting the consumer to shop around more and it is not achieving this, what’s next for KFIs? I don’t believe the government can force consumers to shop around more so the only alternative must be to make the KFI more user-friendly so consumers use it for its intended purpose. In early 2005, the FSA conducted a review of mortgage disclosure documentation and wrote to chief executives of lenders stating: “These disclosure documents are central to the success of the mortgage regime.” The core message of this letter was that a five-page KFI should be sufficient to convey the key facts about a mortgage product with enough clarity to allow for useful consumer comparisons to be made. At the time of the review – May 2005 – only 50% of lender KFIs were five pages or less. Anyone who works in financial services knows of the classic mismatch between customer communication (meaning sales and marketing) and compliance (meaning detailed attention to the letter of the law), with the compliance function almost certainly being the factor that controls the KFI format. If the FSA can succeed in closing the gap between these two opposing forces, it will be an achievement to celebrate.
The Financial Services Authority has revealed that its compliance review of small mortgage brokers advising on sub-prime found too many cases where firms were unable to show that they had followed the required procedures relating to suitability.Three firms were identified as potentially assisting customers to obtain a mortgage where their income would not meet the […]
Kensington Mortgages has made further rate cuts across its range. This follows fixed rate cuts made in August and the cut in the base rate to 4.50%. Keith Street, director of sales at Kensington Mortgages, says: “We’ve strengthened our range by reducing interest rates across our medium adverse range and most of our Right to […]
The Mortgage Business, the specialist and packager focussed lender has announced reduced rates on its fixed rate, plus dedicated remortgage and self build products.The rates include refreshed fixed rates at 4.95% until the end of 2008, a remortgage only self-cert rate with no completion fee and 750 cashback (set at BBR +0.99% until end 2008 […]
John Charcol launches two exclusive, ground-breaking deals for the buy-to-let market, one of which comes with no arrangement fee during September, and also gives a full refund on valuation fees. All lending is in sterling, protecting homeowners from any currency risk, and both deals are available for purchase or remortgage.The exclusive John Charcol product, funded […]
This guide from Johnson Fleming will take you through the required communication and also give ideas for additional actions that will ensure your auto-enrolment project is a success. The topics in this guide include: the letters you need to send out; what to send and when; the importance of employee engagement; and what to consider as additional communication.
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