”This paper is as much about the FSA as it is about the mortgage market it has been regulating since 2004. It offers few surprises in terms of its scope and the list of potential areas for action, but the FSA acknowledges that its own disclosure regime is seriously flawed.
”Although the FSA admits to some of its own errors, it is playing to the gallery by heaping blame on non-banks and non-income verified lending as being at the centre of the market’s problem. This is too simple an argument. Non-banks weren’t the dominant lenders in the markets in which they operated and non-income verification lending was underpinned by credit scoring systems. Non-banks play an important role in the UK mortgage market and a regulatory environment which makes it difficult for them to compete will only be detrimental for consumers and for innovation in the marketplace. The use of credit scoring as an alternative to income verification reflects the much more complicated assessments required in this process than simply proving how much income a person has - as the FSA’s paper makes very clear.
”Everyone has had a part to play in the weaknesses that have been exposed and all will need to contribute to developing a better system. We now need an honest and open debate without sacred cows. The paper provides a basis for that but we need to see joined-up thinking across the FSA as well as the industry. Both the regulators and the regulated have been shown to be flawed. IMLA looks forward to working with the FSA on unpacking some of the arguments and developing a sustainable regime for the future.”
