Key industry figures offer their opinions
Some of the biggest names in the mortgage industry recently gathered on Mortgage Introducer TV, in association with Mint Property Finance, to delve into the impact FSMA regulation has on both brokers and lenders.
Richard Showman, head of lending at Mint Property Finance, Vic Jannels, chief executive of the ASTL, Ray Cohen, director at Jackson Cohen Associates, and Richard Stock, senior associate at Sirius Property Finance, were questioned on the regulation’s impact, as well as how to overcome the difficulties in following the guidelines.
Watch now: What impact does FSMA regulation have on brokers and lenders?
Cohen explained that within FSMA regulation, you have got the structure that regulatory activities order, which defines regulated mortgages, as well as the credit broking part and the mortgage credit directive, with the latter setting out specific rules and regulations.
Showman added that if companies are found to have acted contrary to the strict regulation, then the lender is liable for criminal action.
“There are many different sets of rules and regulations that we have to adhere to, and I think this is all part and parcel of identifying and pointing out the ways in which we can all be protected when we are dealing with our consumer and their requirements,” said Jannels.
Looking to the difference between regulated loans and regulated activity on that loan, Showman said that Mint Property Finance seeks to get its cases from approved brokers, or approved representatives of brokers, to ensure they have a clear understanding.
Meanwhile, Cohen explained that there are two parts that you have got to consider - part one is what defines a regulated loan and whether that is a regulated mortgage contract or consumer buy-to-let regulated credit agreement, then the second part is the regulated activity, which he said is for regulated or registered lenders.
“For brokers it is about their activities being correct, whether that is arranging, advising, credit broking and debt counselling, as well as having the right permissions for all the bits that they are going to do,” said Cohen.
Jannels added that it is incumbent upon the seller, the broker, and the introducer to ensure that the customer knows what is required of them in the journey.
How to ensure you adhere correctly
Cohen believes the rules are very complex, and noted that the drafting is quite poor.
“For large lenders the risk of loss is quite small, but smaller lenders are not going to take that chance - what we are seeing with these claims is more and more firms saying ‘no’,” he added.
Read next: Mint Property Finance secures multi-million facility
In terms of how the sector might avoid some of the risks involved, Stock said it was a case of going back to basics and knowing your client well.
Showman agreed and added that training is also fundamental so those involved within the process are aware of any issues before they crop up.
“We are working in tandem with FIBA and LIBF in order to create an educational structure, which will be available to new entrants,” said Jannels.
