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Labour MP horrified by MMR

Labour MP George Mudie says he is horrified by the Financial Services Authority’s Mortgage Market Review and believes the regulator has lost its balance and could damage the industry.

Speaking at a Treasury Select Committee meeting this morning on competition and choice in the banking sector, TSC member Mudie says he thinks the MMR would damage the mortgage and house building sectors.

He told the committee: “I am horrified by the MMR. I think the FSA has lost its balance, to guard against “you were weak and are still weak”, they have swung the other way and they could damage the building industry and the mortgage industry and young kids getting a new house because of all the regulations.”

He asked Graham Beale, chief executive of Nationwide Building Society, whether the FSA was micro-managing regulation and whether it was not the job of the borrower and the lender to assess risk.

Beale told the TSC: “I don’t think the FSA did a full economic assessment in terms of understanding the implications of the MMR and what it would do to the ability of borrowers in the UK to borrow from banks or building societies.

“When it eventually did, it realised there were a lot of unintended consequences, which is why it has now gone into consultation with a view to get something that is more pragmatic.

“It will now hopefully achieve some of the extra safeguards it intended but not undermine the market.

“The FSA is right in wishing to eradicate the state of the mortgage market prior to the crisis where the lack of constraint around lenders like Northern Rock led to 125% LTV mortgages and lending against high loan to income multiples.

“This went beyond the relm of reasonable responsible lending and its right we don’t have an environment where this could repeat itself.”

But Mudie replied: “I think the scheme seems far from that and seems almost personal and would rob building societies of any discretion in terms of individual customers.

“It is one thing building a mortgage book up of doubtful loans but another taking a chance on a young couple that are in work but cannot get a deposit.”

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NEIL WARMAN, CHIEF COMMERCIAL AND FINANACE OFFICER, HML

Help from your flexible friends

With the mortgage market at a low ebb, firms large and small are busy reorganising their businesses. Third party servicers could offer them ’an office down the road’ which takes care of non-core activities, the outsourcing of which will free up resources

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  • anon 4th February 2011 at 4:02 pm

    I think the difference with Nationwide’s product was that is was only offered to existing customers in a neg equity position who needed to move or downsize. For example to move jobs etc and therefore improve their financial situation. NR product fisrtly was a 90% loan plus unsecured loan as pointed out by another post and was aimed at FTB or those without a big enough deposit, some of whom were on the cusp of financial difficulty and therefore it was not the most sensible idea. Please lets be informed before casting judgement. I would have expected qualified advisors to know the differences!

  • Stephen Bell 4th February 2011 at 10:46 am

    Its a little rich that the Chief Exec of Nationwide states the lack of constraint around lenders like Northern Rock led to 125% LTV mortgages – didn’t Nationwide introduce one themselves in 2009, after the banking crisis! And can please someone understand that the so called 125% LTV mortgage was in fact a 90 or 95% LTV mortgage with an unsecured loan offered at the same rate. Which incidentally first time buyers could still do now to help them get on the property ladder – i.e take an unsecured loan for a deposit (similar to that which many young people do to buy a car) and also take a 90% mortgage, hey presto you’ve got a together mortgage! As long as they can afford it comfortably that would still meet the requirements of the MMR and get the prperty market moving again.

  • Robin Banks 2nd February 2011 at 2:43 pm

    And now you will see the rise of the hedge fund privatley backed lenders – if I want to lend you MY money, can’t I do it on MY terms ?

  • Robert Kennedy 2nd February 2011 at 9:27 am

    Going to damage the market. It is almost dead. What they are failing to address which will be the problem over the next couple of years is that people are stuck with their lender. Look at all the products that existing self cert, sub prime. sub prime self cert etc. There will be many people who have not defaulted due to the low rates. As soon as they creep up we will see exactly what is happening in the USA. A step back to the old school underwriting model is needed where common sense decisions can be made. Whilst we live in the computer says no world, the problems are only building.

  • Tony Robb 2nd February 2011 at 9:08 am

    We should the same rules as on the continent. No more than 30% of disposible income on mortgage repayments. Stops property bubbles and mortgage defaults (therefore lower interest margins). UK house prices need to drop 20-30% (elephant in the room) before mortgage market can return to normal.

  • amar 1st February 2011 at 8:36 pm

    I agree with all above, If there are NO mortgages, No Brokers left, No new ho9mes, No builders with jobs, not many Estate Agents left,No brick makin gand building materials produced, half the mortgag companies vanished, half the building societies have dissaopeared in thin air….what is left is less than half income for us brokers……where is country leading somebody needs to think….

  • Maurice Edgington 1st February 2011 at 6:08 pm

    Whilst I agree with all comments I must ask how many intermediaries responded to the consultation papers? I did and made my points, hopefully I was not alone.

  • anonymous 1st February 2011 at 6:07 pm

    I am so fed up with hearing about NR’s together mortgage as risky!!!!if your going to slam it then why don’t we talk about all the borrowers out there that purchased at 95% and have £30,000 of unsecured debt!!!Same thing isn’t it!!!!

  • j.d.hooper 1st February 2011 at 5:55 pm

    Democracy is about listening!! Be warned- look whats happening in Egypt. Please note there’s a TUC March being organised in London on the 26th March 2011. Is this the start OF SOMETHING MUCH BIGGER THAN RDR, MMR, FSA ETC ETC

  • colin chapman 1st February 2011 at 5:50 pm

    mic2002…yes indeed but that very simple fact is not easily understood by our journo’s who like you say assume the worst case scenario from an isolated fact.

    I have some clients that used the Birm Mids mortgage that offered the same as Northern Rock, they consolidated some debts from credit cards etc that would now be 20%+ they are paying 2.49% over base. For the right client and right scenario, explained properly with advice it wasn t neccesarily a bad product!!!!!

  • Stuart Gregory 1st February 2011 at 5:26 pm

    @Alan Campbell

    Have already tried the local MP route Alan – my local one replied within 48 hours.

    Which was nice of him. He passed my concerns onto Mark Hoban for him to respond.

    That was October 2010.

    Still waiting Mr Hoban……………

  • mic2002 1st February 2011 at 5:10 pm

    Alan, I agree with you.Our problem is that the fragmentation within our industry is holding us back.There doesnt appear to be a simple way of allowing individual brokers to have their say.Ami are useless (too many cooks and interested parties involved).I have advocated a ‘council of brokers’approach the FSA – a panel of networks mortgage clubs and others to get a direct message.But no one seems to bother.Cherry has had a few things but all very low key.
    I believe if we shout loud enough we will be heard and can effect change.But we just dont seem to have the bottle for it.

    A small point is that NR didnt actually provide a 120% mortgage did they? It was 80% plus secured loan (same as half the country).

  • John 1st February 2011 at 4:53 pm

    The Northern Rock’s problems were not caused by bad lending but by the securitisation of the loan book. I wonder if any one has asked how many of the 125% LTV and high income multiple mortgages went into default? I think you will find surprisingly few. But on this they hang the whole industry. The mortgage mkt should be dynamic, flexible and competitive- not restricted as is proposed. Surely the lender in the free world be allowed to make commercial decisions as who to lend to and on what terms

  • Paul Violet 1st February 2011 at 4:53 pm

    Spot on. It’s not in the nature of the beast to listen. It will battle on regardless, proving yet again that it naver has been and never will be fit for purpose. How on earth it was ever allowed to wreak the havoc it has is beyond me.

  • Colin Chapman 1st February 2011 at 4:51 pm

    With the onset of the credit crunch over the last 3 and a bit years the lenders have pretty much made happen what a large part of MMR is all about. Self cert has gone, 125% gone, self cert sub prime gone, sub prime…a small pulse exists.

    All the FSA really need do is prudently manage the products available when liquidity returns, ie no self cert, no 125%. and not delay on the registration of every broker

  • Alan Campbell 1st February 2011 at 4:43 pm

    I agree that nothing will be done about MMR and that the FSA will get its way. That is unless we as an industry get off our backsides and start a campaign against it. The first thing that should happen is that the mortgage networks should take a strong united stance and push Cameron, Osborne and Cable into stopping it in its present form. The second thing is that we, as mortgage brokers, should stop moaning about it and also adopt a united stance. We should also take action by writing and emailing our members of parliamen, as well as the PM and members of his cabinet. What about then, are we going to sit back and watch our livelyhoods disappear or are we going to take action.

  • Jeff 1st February 2011 at 4:42 pm

    I find it difficult to believe that its taken so long for MPs to smell the coffee. There has been plenty of industry comment regarding the FSA that should have been picked up by these people. The FSA were asleep at the wheel and the current approach is just a knee jerk reaction at best and, if seen through, has the potential to destroy our industry.

  • David 1st February 2011 at 4:41 pm

    I agree – the big axe is already in its arc of falling – nothing short of a govt repeal will stop it now, and despite all the blustering will anyone step in the axe’s way ?? The damage to the UK will not be realsied for 2 – 5 years and by then it will be too late – lets build more houses they will say – by whom all the carpenters and bricklayers are now in cosy call centres – not offering debt advice of course as they canned funding for that too !

  • david 1st February 2011 at 4:38 pm

    This government has said time and again that they are going to get rid of the FSA. It’s sad that it has taken a Labour MP to voice the concerns that most of us in the industry have. We managed perfectly well under the MCCB and indeed before that.In fact look at where we are under the rule of the FSA – the biggest financial mess this country has ever been in! A mortgage is basically a simple product, however, under New Labour’s regulator we have made it into a product that requires the IQ of a brain surgeon to fully understand it. The risk lies with the lender and it should be their decision whether to lend or not!

  • Kevin friend 1st February 2011 at 4:32 pm

    Welcome to the fold! A little late but you are a Labour MP. Have a chat with Mark Hoban when you see him.

  • Luke Atkinson 1st February 2011 at 4:12 pm

    I find it ironic a member of the party that bought about the beast is now condeming it and asking for it to be reined in. The story of Frankenstein comes to mind.

    Nothing will change, the FSA will bring in MMR, they will continue to ignore the concerns of industry professionals and hammer the final nail into the coffin of an already doomed industry.

  • John Chedozie 1st February 2011 at 4:05 pm

    He’s horrified is he? Well, he’s not alone thats for sure.