Mark Mountney asks if, in the lead up to ‘Mortgage Day’, lenders have done enough to assist intermediaries and convince the industry they are ready?
As I sit and write this article on 27 October I am absolutely sure that I am no different from most intermediaries in that we have been incredibly frustrated by the general lack of readiness of most lenders. This is reflected by the apparent ‘disaster waiting to happen’ around the compliant production of key facts illustrations (KFIs). Even those that have purported to be in front of the game have not given the intermediary enough time to apply for registration, to test or generally get our heads around what is proving to be a sea change in working practices.
For example, we were led to believe this week that a broker managed to get a KFI off the BM Solutions website shortly after midnight on the 11 October. This may have been so but rather a shame that it wasn’t compliant. There was no ‘Key Facts’ logo. Even today it is not there so, in the event that we wanted a compliant document before Monday 1 November, we couldn’t produce one. Yet.
Handful of lenders
So here we are just days away from ‘Mortgage Day’ and just a handful of lenders have proven that they are ready. The real test was always going to be the availability of KFIs. We need to know they are accurate rather than believing the lender’s word. We need to be able to test them for the advisers’ purposes, not just the lender’s.
To really highlight the issue let me explain our recent approach here at PMM. We have taken the view that we will only progress sales with lenders that we have proven as ready. Today our panel is just eight from an initial panel of some 20 or so. That is slightly less than 50 per cent just two days before the off. But I will not compromise our clients or the company to show allegiance to lenders that have failed to convince us of their supposed readiness. They have had long enough to prepare and they will have to carry the cost of losing, albeit short-term, business from us. After all, many have not even had the decency to contact us to persuade us otherwise.
Enough time?
So have the lenders really had enough time to prepare? In order to determine this we have to step back in time. The regulation of mortgages was announced as far back as January 2000 by the Treasury and was originally targeting just the product rather than the advisory element. Hence, with a massive turnaround and an admittance that they had got it wrong, the FSA were given the eventual remit to regulate both lender and adviser with an outline of their plans as far back as November 2002.
So the industry has had two years to formulate their own plans and to instigate the necessary changes to systems and procedures to ensure a smooth transition. Is that enough time? Absolutely.
The reality of course is that most of the skeletal changes were identified and initiated some time ago but the real problem I believe is the speed of IT development. Being aware of the issues to be addressed is one thing, being able to put them into practice over the entire market is a highly detailed and tricky job. The size of the task is immense to say the least and, of course, the cost horrific.
Reasons for the trouble
While I would not want to lay any criticisms at anyone’s door, I would make a few observations as to why the industry is generally in the state of non-readiness that it finds itself in.
Firstly, the remit of the FSA is too broad in my opinion. Why fix something that isn’t broken? I believe the Treasury are using this whole episode for political gain since the level of client detriment is minimal when compared to the size of the market. The MCCB created an environment where a lot of client risk had been eliminated so, to take it to its proposed level, was simply unnecessary.
Then we have the extent of the remit to the FSA. Irrespective of the powers allocated to them by the Treasury, with the Mortgage Code working well, some of the proposals are a crass overkill and fly in the face of common sense. There are even direct contradictions and clashes with present regulatory requirements in the investment market. Something new was not necessary. Perhaps just an extension of the MCCB’s requirements jig-sawing in with investment requirements.
And then the timetable of endless consultation papers made the eventual window rather short to make the final actions by both lender and adviser alike rather pressured to say the least.
Plus we have the pathetic bickering between lenders and sourcing systems and their apparent inability to see the sense of working together to meet a common goal. Absolutely no chance there then, and it is probably for this reason that the market, and all the players in it, will suffer as a consequence.
But, at the end of the day, we have still had the best part of two years to get ready. And the ‘we’ includes the brokers as well as the lenders and sourcing systems. Perhaps it has been forgotten that intermediaries are often an integral part of the sales process.
Mark Mountney is managing director of Premier Mortgage Management (PMM)
