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FSA’s lack of regulation has failed the industry


FSA’s lack of regulation has failed the industry

I was incensed by data released by the Financial Services Authority last week, which showed there has been a decline in the proportion of mortgages sold via intermediaries between Q1 and Q2 2011.

In a trend report published on mortgage sales data, the FSA stated that in Q2 2010, 51% of mortgage sales were intermediated, which fell to 47% in Q1 2011.

The FSA has single-handedly managed to change the lending landscape from one where consumers received advice in an atmosphere of co-operation with lenders, to one where banks treat brokers as vermin and rivals.

The Mortgage Market Review committed the regulator to stronger supervision but it has not even managed to enforce the flimsy rules already in place

There is one simple reason for this and that is the FSA’s failure to regulate execution-only mortgages so lenders can evade the responsibility of giving advice and can churn out non-advised mortgages without fear of being held to account for providing bad counselling.

It is a statutory objective of the FSA to enhance consumer protection, yet its failure to regulate this aspect of the market is contrary to that objective.

The Mortgage Market Review committed the regulator to stronger supervision of non-advised sales but it has not even managed to enforce the current flimsy rules that are already in place.

These statistics bear that out and it is a disgrace.

Stuart Duncan


The UK mortgage system just reeks from top to bottom

With regards to the news that more mortgages are now done direct than via brokers, I have to complete on average 100 pages of paperwork to justify my mortgage recommendation.

In contrast the banks have one sheet signed by the customer to testify that they have not received or asked for advice. Bingo, that’s banks covered then.

Well done to the FSA – its latest trends in mortgage lending report actually confirms it knows the amount of advised sales is decreasing and will
continue to decrease and it does not care a jot.

The whole system reeks from top to bottom.

The FSA is an utter disgrace, even worse than the bankers who lost the country billions of pounds. Clueless, hopeless and vindictive.



Watchdog letting the banks get away with widespread abuses

It is almost impossible to conduct a face-to-face sale on a truly non-advised basis.

The abuses the banks get away with daily make the payment protection insurance fiasco pale into insignificance, but does our regulator care? Does our regulator actually know?

Of course it doesn’t – it hardly understands the mortgage market any better now than it did when it took over, particularly the intermediary market.


Internet is the way to go for non-advised sales arrangements

My firm does not give advice and does not charge a broker fee as such. What we do instead is charge a form of management fee for sourcing, agreeing, frequently negotiating, packaging and obtaining an offer. Our clients like this arrangement a lot.

We are entirely internet-based, which may be the future for any non-advised mortgage sale.

It seems to work okay but you have to have an exceptionally good system in place and respond instantly to enquiries and questions, have a real-time progress tracker via a secure log-in, all of which we have.

It may be time for this industry to get up to date.



Brokers are blaming everyone else for the slump in business

In response to the comments left on Mortgage Strategy Online after the news that the percentage of mortgage sales advised on has dropped, it seems clear brokers are blaming everyone – the banks, the FSA, Arsène Wenger, estate agents, networks packagers.

Well, everyone, that is, apart from themselves.

Remember, guys, you were there in the good times too and the lenders and FSA trusted you
to give ethical advice – we’re all in this together.



Word of warning on built-in risks of some B2L products

In last week’s Mortgage Strategy Paradigm Mortgage Services urged brokers and lenders to adopt a responsible approach to the buy-to-let market, given the growing demand and interest in the sector.

It warned that with a number of new and former buy-to-let lenders entering the market in 2011, there is concern that greater competition might result in a return to the past, with significant rises in maximum LTVs and a distinct softening of criteria, particularly around rental cover and borrower income requirements.

But when Paradigm says it would like to see 15% to 20% deposits maintained and a rent cover calculation at 120% it is talking about pre-credit crunch

products. It ought to be far more worried about the current 125% at payment rate rent cover requirement.

Some products have a built-in flaw -in two years’ time, when they go on to the lender’s SVR, they are guaranteed to have a rental shortfall.

And that is when the base rate is at 0.5%.



GE deserves our backing for lending, not broker brickbats

Following the news last week that GE Money Home Lending had launched a range of products aimed at first-time buyers up to 75% LTV, there were a number of negative comments left on Mortgage Strategy Online. These included asking how many first-time buyers had a 25% deposit to access the product. These were typical, negative comments – at least GE is out in the market lending and trying to improve its products.

I think brokers need to ask themselves this simple question – would you lend your own money to these people who are a risk? A housing crash is probable, not impossible. Any brokers now taking a pop at GE are too quick to forget that it stayed in the market at 90% while others ran.

It kept most of us in business during tough times and its current lending criteria is common sense, in my opinion.

If house prices dropped 15%, then lenders need to price that in when lending at 90%.

Why would anyone consider lending more to high-risk customers?

It’s too easy to blame the lenders without understanding how they get their money and the constraints they have to deal with. Rant over, but one final thing, to the critics I say this – if you have nothing positive to say then become a Robert Peston supporter.



Just wait and see – caution should be the watchword

If any of you have experienced the way GE treats customers, you would not recommend a 95% LTV deal to a client without a big caveat.

It may have been lending through hard times but wait until rates go up and your customers have a problem. You will have to explain why you failed to do your research properly rather than simply offering what you thought would get you the deal.

Some of you may not agree with this but all I say is – just wait.



Platform accuser is wrong to claim it does not want to lend

Following the news story on Mortgage Strategy Online that Platform had seen gross lending of £250m in Q1 2011, I was incensed by one of the comments made on the basis of a client getting rejected.

It is really wrong for someone to come on any website and try to destroy a lender because of one case. Unlike the concept of a kangaroo court, there are always two sides to the argument.

I daily feel a sense of disappointment as cases are rejected because of where the mortgage risk curve currently is. But I honestly believe that
you would struggle to find many more lenders who are as intermediary-focussed as Platform is.

Before I get shot down in flames, I have no vested interest in saying this. I simply take umbrage at the anonymous commentator who accused Platform of looking for reasons not to lend – it is both futile and grossly inaccurate. If more lenders completed on £250m of mortgage assets in the first six months of 2011, like Platform has, the job of an adviser would be both more rewarding and more straightforward.


Claims manager guardian should be welcome news

In the wake of the news last week that a trade body is being set up for claims management firms, the Association of Professional Claims Managers, there was a comment from one incredulous broker that this was a joke.

To that anonymous comment I say this – people stood by and watched their clients get ripped off by the banks selling payment protection insurance that could never be claimed on. I bet those clients, who were never told that they actually had worthless policies and paid thousands for them, are now laughing their socks off.



mortgagestrategy welcomes readers’ letters intended for publication. Letters should be sent to: The Editor, Mortgage Strategy, 50 Poland Street, London W1F 7AX. Letters can also be emailed to


Nationwide cuts five-year fix for new business

Nationwide is reducing all five-year fixed rates by 0.1% for new applications. It is now offering a five-year fixed rate at 3.69% up to 70% LTV, with a £900 product fee and a £99 booking fee for house purchase and remortgage customers.

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  • Garry Anderson 6th September 2011 at 1:28 pm

    Mr Duncans letter “FSA’s lack of regulation has failed the industry” is incorrect – the correct title should have been “FSA’s lack of regulation has failed the public”.

    I agree with him that “It is a statutory objective of the FSA to enhance consumer protection, yet its failure to regulate this aspect of the market is contrary to that objective”.

    I ‘won’ an official complaint against the FSA for their lack of integrity. Though, it is not really a win for the public when the financial regulators lack integrity. The FSA were devious and evasive about why our endowment ‘mis-selling’ was not corporate fraud – and still have not told us. Neither will the SFO.

    The point being – anything from the FSA is an act of PR – merely to pretend the financial industries are being regulated. Even the fines of corrupt firms are paid by the customers and investors – instead of just penalising the directors. Perhaps with prison depending upon crime. The whole system is corrupt.

    Garry Anderson

    Haverhill, Suffolk