Speaking at the launch today of two major pieces of independent research on the potential impact of the FSA’s responsible lending proposals, Coogan said: “The FSA, like the industry, needs to have a clear steer from the coalition government about what type of regulatory structure is needed to support housing policy and deliver systemic stability in the mortgage market in the 21st Century.
"Before we go much further on the MMR, or the restructuring of regulatory bodies, we need Ministers to be clear about their intentions.
"Whether they want regulation to protect the vulnerable minority, or give an opportunity to the majority to achieve their aspirations.
"They can do both by allowing free access to the market to responsible borrowers, but establishing an effective safety net for the few who have difficulties due to changes in their lives.
"This is not the approach which the FSA has taken due to its limited focus on its conduct risk strategy."
The CML says that such an announcement from the FSA would enable respondents to the consultation to respond far more constructively and to forge a path with the regulator to achieving the right regulatory outcomes, in the knowledge that the FSA is listening to the evidence, and aware that the rules as currently drafted are well-intentioned, but flawed and impractical.
The two new sets of research findings, by economic research consultancy Oxera and by economic and social research consultancy Policis, have been funded by the CML but are independent in their assessments.
They, along with the other evidence produced by the CML itself, should give the FSA pause for thought as they bring together a wide range of evidence that suggests there would be a range of negative, unintended outcomes from the implementation of the FSA’s policy and proposed rules as currently drafted.
Coogan added: "When we know what the government wants the regulator to achieve, we and FSA officials will be in a better position to deliver the sustainable market for all participants which is flexible for consumers. These two outcomes reflect a shared vision by the FSA and lending industry. The CP proposals have blurred that vision to a point where neither outcome will be delivered by CP 10/16 as drafted. If you agree, write to the FSA, your local MP and relevant Ministers.”
In a formal response to the CML issued this morning, the FSA said: "The Mortgage Market Review aims to address the major failures that have occurred in the mortgage market and to replace risky lending and unaffordable borrowing with common sense standards. While many people are currently benefiting from historically low interest rates, market contraction has already impacted over 2 million borrowers and our evidence has found that almost half of UK households (46%) have had little or no money left after their mortgage and other bills were deducted from their income.
"There are currently 350,000 borrowers in arrears and 54,000 homes were repossessed last year. Even a modest rise in interest rates could lead to a significant increase in the number of families suffering financial distress. This is why it is imperative that we ensure lenders act responsibly and do not return to irresponsible practices, in order to protect consumers from taking on mortgages they cannot afford and potentially losing their homes.
"We think that much of what we are proposing is consistent with how lenders themselves have already tightened up their procedures following the recent downturn. No doubt this is why our proposals have been characterised by a number of firms as simply marking a return to ‘sensible underwriting’ and common sense. As we have said before, we continue to welcome and review all feedback we receive and we have already indicated we will not rush into change without fully assessing the impact of our proposals on the mortgage market."
