It was clear from the Mortgage Market Review that the Financial Services Authority had a very limited understanding of the value of a self-cert mortgage for many, primarily self-employed, people.
Before finalising any new policy, even though the actual term self-cert appears to be irretrievable tarnished, the FSA will no doubt reflect on comments made during its roadshows and in the consultation process.
Just because there was some abuse of the product doesn’t mean the product itself is fatally flawed.
A more appropriate solution would have been to clamp down on the abuse, especially where it was fraudulent, but in the good times the FSA failed dismally to adequately discharge this part of its regulatory responsibility and consequently feels the need to overact.
A significant part of the blame for this regulatory failure has to lie with the current Prime Minister Gordon Brown.
Despite blaming everyone but himself for our economic problems, “which started in America,” as chancellor he dictated the light touch policy to be followed by the FSA.
Of course, most of us in the industry were happy with a light touch policy but perhaps not that it should have been quite as light as it was.
Many mortgage practitioners were well aware of some of the companies whose business plans basically only worked if they adopted some dubious practices and there is no reason why the FSA couldn’t have been much more proactive in identifying which companies should be targeted for more active monitoring with a view to educating if possible but disciplining if necessary.
On the only occasion I reported a blatant breach of the rules to the FSA no action was taken over the next month and so I wrote about it and then very rapidly the company took action itself, possibly without the FSA ever getting involved.
So even when given information on a plate the FSA proved itself unable or unwilling to act promptly.
A key test any half competent broker or lender would always apply to a self -cert application was a sense check.
For example is it reasonable for someone who describes their occupation as a cleaner to be earning £80,000 per annum?
Maybe, but only if that person owns the company rather than does the actual cleaning.
Yesterday we had another example of politicians making fools of themselves by failing to apply the sense check.
This time it was in a document from the Conservative Party detailing the gap between the Britain’s richest and poorest areas.
Conservative Central Office released information claiming that more than half of girls – 54% – in the most deprived communities fell pregnant before their 18th birthday.
This claim was not only untrue but also breathtakingly ignorant. A crucial decimal point was missing – the real figure is 5.4%.
Now if you had asked me before yesterday what the correct figure was I would not have known but my common sense would have told me that 54% looked highly suspect.
Had a sense check been applied to the document by a competent person before it was released the document would have been corrected before it was published.
So, surprise, surprise, politicians can make mistakes as well as mortgage brokers and lenders, but of course they don’t have a regulatory body costing an arm and a leg looking over their shoulder and so won’t actually be disciplined. Politicians’ motto appears to be “do as I say, not as I do.”
Fortunately there is a sanction against crass mistakes by politicians.
It is called The Media and with the mass ranks of the blogosphere and/or newspaper web sites now often picking up politicians’ cock-ups within minutes at least politicians are subject to as much, if not more, scrutiny than their subjects.
Politicians may not be fined when they make crass mistakes but they stand to lose something more valuable – their reputation.