The move is designed to bring clarity to the relationship between lenders and intermediaries, and formally set down in writing which party is responsible for which parts of the mortgage application process. It will also address issues relating to which party owns the customer in a transaction.
Coogan told Mortgage Introducer: “We think now is the time where we have to replicate what AIFA and ABI did many years ago, which is write down what the roles of the two parties are.
"It might seem odd that having had MCOB for five or six years, that no-one’s written down what intermediaries do, what lenders do, and what do they not do.
"I think it’s now time for us to develop with AMI our understanding of what the current requirements are.”
Reasons why
Coogan says there are two reasons for tackling this now.
He said: “One, it’s important to have recognition on both sides, that both sides have roles and responsibilities but they also need to understand what the other side should be expected to do, so that they can then identify any failures to take responsibility.
“Two, once that marker is in the sand, you can use it to measure the Mortgage Market Review proposals coming forward in Q4 this year, to identify where the roles and responsibilities are.
"One example of that would be who does the affordability check, and how can we avoid it having to be done twice.”
Coogan says the way the MMR proposals read to the industry is that suitability of the customer is the requirement of the intermediary, affordability is the requirement of the lender.
He says currently there is a question mark about whether that check of affordability done by the intermediary can be relied on by the lender who takes responsibility for it, or if it has to be duplicated.
“Are you going to delegate that to an intermediary?” he asks, suggesting this was one area the CML and AMI could work together on to agree a process before the FSA prescribes the relationship in the autumn.
Currently there is no duplication of the affordability check and the lender is complementing what the intermediary does, but Coogan wants this relationship to be codified.
He said: “AMI and the CML see the benefits of something which describes the roles and requirements of the intermediary sector, clearly there are lots of questions going beyond the FSA which we’re yet to get into, such as standard contracts between lenders and intermediaries, commitments not to do dual pricing, or who owns the customer.
Variety
“There are a whole variety of things in terms of the relationship between brokers and lenders and there is value in having conversations to try to understand the pressures on either side across the market as a whole.
“I see this as the start of an ongoing programme of work with AMI to try and identify what competition will look like in the future.
"We all talk about a normal market returning, I think the challenges will be to have a shared view of what a normal market is post credit crunch, and who’s it normal for?”
Coogan said discussions were already underway and he expects details to be available once the two trade bodies have “written a coalition agreement”
He added: “The key thing for me is that we need to tell the FSA the answer before they raise the question. The distribution paper in Q4 is in my mind as an end game.”
