The high price of procrastination

If lenders find themselves facing unpalatable regulatory changes soon they only have themselves to blame for not responding to the FSA’s consultation on the Mortgage Market Review, says Philip Tebbatt

Philip Tebbatt
Philip Tebbatt

We all know the therapeutic feeling of finally tackling that job which has been nestled comfortably towards the edge of your desk for just a bit too long.

This normally coincides with a quiet time which means that addressing the unsavoury task in question can no longer be avoided by being seduced by the distractions of the working day.

Of course, once you’ve got your teeth into it, it generally ends up being far easier and less complicated than you imagined, dispelling the concerns that caused you to set it to one side in the first place.

Well, it’s impossible to ignore the fact that the mortgage market is going through a quiet time. And for the mortgage team at the Financial Services Authority this clearly means it’s time to get their teeth into some of the issues the industry is facing.

The frenzy of the regulator’s activity shows no sign of abating, the latest manifestation of this being the publication of industry feedback to the Mortgage Market Review.

It seems that we’re going to hear much more on this issue as the FSA has signposted further consultations over the remainder of this year, a paper in Q3 2010 relating to arrears and a paper in Q4 on mortgage distribution and selling standards.

It was not as hard to respond to the Mortgage Market Review as it seemed at the time, and it may be much harder to live with the consequences of not responding

But what will be the result of all this activity?

Well, respondents to the MMR did not support introducing a man-datory cap on LTVs although they did generally support compulsory income verification for all mortgages.

This response is cited despite a widespread recognition that the market has already made its own adjustments in this regard by withdrawing products.

There’s also said to be an acceptance that selling standards would be improved by extending the approved persons regime to the sales process. This is seen by respondents as leading to a number of positive outcomes including removing rogues from the industry.

No concrete proposals leap out from the publication – these will no doubt come in due course. But it is interesting to note how the document portrays thinking in the industry as evolving.

It’s tempting to dismiss some results as being akin to approving of motherhood and apple pie but if we assume the FSA will use this infor- mation it’s worth looking at the responses for clues as to where they might guide its actions.

But as important as the responses themselves are the sources as any traditional history teacher will tell you, and this is where the FSA’s feedback paper fails.

Some 154 non-confidential respondents are listed and of these only about 20% are lenders. Of course, the flippant point to be made at this point is that there are only a few lenders left in the industry.

But the fact is that the list does not in any way give a representative sample of the lending market so we should worry about any decisions made on the back of the responses.

On the other hand, as it’s been a quiet time for lenders they only have themselves to blame if they never got round to ploughing through that pile of documents from the regulator they were busy trying to forget.

It was not as hard to respond as it looked at the time, and it may be much harder to live with the consequences of not responding.

Philip Tebbatt is principal of niche financial services law company Slater-Rhodes and can be contacted at philip.