Regulation which protects the consumer from thieves and charlatans is a good thing. Regulation which treats consumers as idiots and believes that the more paperwork that is processed, the better for everyone, is ridiculous and an incredible waste of time and money.
Lenders who believe that requiring increasing amounts of support documentation means they are being ‘responsible’ are not playing with a full deck. Every single repossession started with a loan that had all the paperwork in place and all the underwriter boxes ticked. Lenders hold the first charge on the property. That should be sufficient protection for the loan. Documentation should move from ‘maximum conceivable’ to ‘minimum reasonable’.
Automated systems for agreements and decisions-in-principle (AIPs/DIPs), and applications haven’t helped much. AIPs are faster, but less subject to human intervention when things aren’t straightforward. Fighting with software that is different for every lender, system problems, new programs, systems down for maintenance, and overloaded IT departments have not made life easier for brokers.
Regulating the mortgage market and not secured loans is a sure-fire way to get consumers in more trouble than they already are.
‘You can self-certify your income, but we may still check up on you’ is nonsense. If the risk is too great, don’t offer it. If you do offer it, trust the broker to do the right checks.
Lender service levels are generally appalling. They consistently take on more business than they can handle, and it takes them forever to process things. They can’t seem to do basic arithmetic and figure out that having good service levels, and spare underwriting capacity, would improve the bottom line immeasurably.
It takes six to eight weeks on average to complete a remortgage for a customer who has had a mortgage for a while, has a known credit status, has been vetted by a broker, and who just wants a better rate. And no one finds this absurd?
Banks are currently being hammered – correctly – for charging huge fees on current accounts for doing simple admin chores like writing a letter when you go over your overdraft limit. The rule is ‘a reasonable charge to cover your actual costs’. Why doesn’t this apply to mortgage lending? Charging a bewildering and complex array of fees, and incredible ‘arrangement’ fees, which are actually profit, does fall under ‘Treating Customers Fairly’ (TCF). If the Financial Services Authority (FSA) is going to regulate the industry, but not ‘distort the market’ by regulating fees, how is the client protected?
Finally, how can lenders get away with offering incentives to brokers to place business with them? Aren’t we supposed to be giving the client the best deal, regardless of incentives? How do you explain that in your suitability letter? ‘I’m recommending this product because I might win a new HD TV’?
Remember always the pseudo latin phrase: ‘Illegitimi non carborundum’.
Stephen McDaniel
The More Group
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