Who controls affordability?

An open letter to the FSA from Frederick Ahmed

I would be grateful if you could provide me with guidance on apportionment of responsibility for affordability as it appears lenders are attempting to abdicate their duty for responsible lending under MCOB 11 by shifting the burden solely on to brokers.

Lenders appear to be taking the view that because brokers are now regulated and are subject to MCOB 4.7, lenders do not need to carry out their own various checks and assessments.
Brokers are not privy to statistical data on loan performance. Even if they are they do not have the competence to interpret this data to determine what is affordable and what is not. At best, his view of affordability is likely to be highly subjective.

As far as MCOB 4.7 is concerned, what does the FSA define as being affordable? Is it an income multiple of 3.5 or 7.5? Or is it that after taking the client’s income and expenditure into account there remains a surplus? And how large should that surplus be?

Without some objective guidance or criteria on MCOB 4.7 the broker is left in an untenable position.

This issue has been thrown into focus by a case I am handling. The lender in question eventually agreed to carry out full underwriting, but the FSA still needs to clarify the issue.

Frederick Ahmed
Arbor Financial Services
By email