The Financial Services Authority’s Mortgage Market Review consultation period has ended and the most significant changes I expect to see concern income verification and fast-track mortgages.
Fast-track effectively enables an immediate decision at point-of-sale for low-risk, mainstream remortgage applicants.
In recent years this has facilitated a fast, transparent and competitive market for clean remortgages. and an important revenue stream for brokers. It’s precisely the sort of market you’d think the FSA would celebrate. But it’s clear from discussions surrounding the MMR that the regulator feels differently.
Or course, there are examples of fast-track processes having been abused. Some brokers and lenders appear to have treated it in the same way as self-cert and this has driven the FSA’s negative opinion of the process.
But the arrears performance of fast-track loans written by big lenders shows this abuse cannot be frequent or serious.
Fast-track loans outperform portfolio average arrears rates and match the performance of identical loans that do not use the fast-track process.
So the MMR proposal would discard a process that significantly benefits consumers to achieve a reduction in arrears so small that none of us can measure it.
Of course, lenders must take their responsibilities seriously. We must balance the availability of fast-track with maintaining the quality of loans written using the process, and be proactive in terms of looking out for abuse and acting when we find it.
Also, broker firms must take responsibility for the behaviour of the business writers working for them and be similarly proactive.
Systems such as these are needed to ensure that abuse remains uncommon.
The strong management of our fast-track book means we are able to categorically say that the system works
By asking brokers to obtain proof of income for clients and ensuring we receive responses when we request validation of applications we have been able to ensure the success of fast-track.
Those brokers who have abused the system have been met with a zero-tolerance stance from us that has led to their suspension.
This strong management of our fast-track book means we are able to categorically say to doubters that the system works.
It’s possible to imagine the FSA writing rules that would reinforce this approach rather than simply discarding the fast-track concept.
Along with several other big lenders we are making the case for a continuation of the fast-track system or something similar.
We’d like to encourage support from like-minded organisations across the industry.
Our concern is that the FSA may be moving too fast to discard what has been a positive feature of the mortgage market.
We’ve proved that when properly managed fast-track is not a driver of arrears or repossessions and are pleased with how it has performed within our business.
The industry as a whole will come under close scrutiny in the coming months but by working together we can prove that fast-track is a valuable distribution technique from which all parties can benefit.
I hope that you too can see the value of this campaign.
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