The director with responsibility for mortgages and small firm supervision at the Financial Services Authority (FSA), reiterated the key findings from the Mortgage Market Review(MMR) discussion paper published on 19th October and discussed some of the reasons behind the key changes. These included:
* The FSA's mortgage proposals are evidence based and built upon thorough analysis of what went wrong and why;
* The reforms that have been proposed will ensure that when confidence returns to the mortgage market it operates in a way which works for consumers and is sustainable for all participants and that there is no return to the mistakes of the past;
* While many of the changes are focused on lenders, intermediaries are obviously a key part of any change and will continue to be important players in the UK market;
* The FSA has also evolved and has introduced a radically new approach - intensive supervision - designed to deliver its outcomes focused philosophy, which requires its supervisors to judge firms on the likely consequence of their decision and which proactively challenges business models.
Lesley also set out to dispel some of the myths that had arisen by emphasising;
* The FSA's proposals on self-cert would not block access to the market for the self-employed; as a 'non-regular' income does not mean one that cannot be verified;
* The FSA will be working closely with lenders and intermediaries to identify what appropriate forms of income verification are and to define good practice in affordability assessments;
* While lenders have the ultimate responsibility for verifying affordability, intermediaries will continue to play an important preliminary role in assessing the suitability of a mortgage product for the consumer.
The speech also identified specific proposals for change and highlighted;
* There are some current practices, notably in the area of arrears and repossessions, which need to be addressed and it proposes to do so urgently;
* The FSA is assessing whether a ban on the sale of products which exhibit certain toxic risk combinations should be implemented;
* The FSA is assessing the case for banning specific forms of arrears charges and will be taking a more interventionist and robust approach to monitoring and enforcing against excessive charges, and to providing greater customer clarity as to what is actually being paid for;
* The FSA proposes to extend the approved person regime so that individual mortgage advisers - in intermediary and other firms - will need to be assessed by the FSA as honest and competent which will drive up standards within the UK mortgage market.
