The most important work in the transition to the Mortgage Credit Directive rules took place behind the scenes
In the years leading up to the new millennium, when Y2K paranoia gripped the nation, an article was published in the New York Times that read: “The nation’s utilities told a Senate panel that they were working to solve expected computer problems when 1999 ends but that they could not guarantee the lights would not go out on Jan. 1, 2000.”
While we can look back on this with amusement now – knowing, of course, that the lights did not go out – the truth is, as the end of 1999 approached we just did not know what was going to happen.
Fast-forward 16 years and the secured loan industry found itself in a similar position – albeit on a much smaller scale (it is fair to say a few days’ disruption in the second charge sector would not have the same impact as the entire global computer network crashing). Indeed, no one really knew what would happen when the second charge industry switched over to Mortgage Credit Directive rules on 15 February.
The date – though not the official deadline set by the FCA – was one agreed upon by the industry as a whole. Considering pipeline cases will need to be completed by 21 March, the general consensus was that the MCD would need to be adopted by mid-February. The industry was expecting teething problems and those expectations proved correct.
First, many broker firms had to implement advice overnight. This was an internal challenge, which ideally should not have coincided with adopting an entirely new regulatory regime and an across-the-board change in lender systems and documentation.
Getting to grips with lender systems was enough of a challenge and, unsurprisingly, not all had theirs up and running by 15 February. Those lenders that had planned a late launch provided screenshots of their new systems. But while one should applaud this attempt at being helpful, it was no substitute for logging on and having a go. For the most part, those that had been developed over a long time, involving broker feedback, were the most user-friendly and reliable.
Brokers like systems with a two-stage process that allows them to run affordability checks without having to enter a complete application. It is a pointless exercise entering a complete application to then find out the affordability fails.
Because affordability is now the responsibility of lenders, it has to be system checked every time and this means cascading through various systems until you get a positive result. Granted, the lender systems are unfamiliar at the moment but there have been examples of it taking four hours to manually check affordability on different ones before getting the deal accepted. Technology and XML integration will reduce the problem, at which point we will get instant answers from multiple lenders, but such integration needs to be a priority.
In every case, lenders’ staff tried their best to help brokers with queries and to overcome issues.Of course, behind the scenes there was the challenge of managing the upheaval without causing any concern to the introducing broker or their client.
In a number of cases, broker managers had to learn how to use the new systems, identify, feed back and overcome bugs, and try to help other staff while projecting an image of serenity to their brokers and clients. That is no mean feat.
So the first week of MCD second charges has proved what we already knew to be true: while technology is crucial, the most important part of the entire process is the human factor.
It is that human factor within lenders and brokers that should, for most of us, make MCD week something to look back on and ask: what was all the fuss about?
Steve Walker is managing director of Promise Solutions