As we enter the second quarter of 2009 life for many mortgage brokers in particular seems to get tougher and tougher. We have just witnessed the announcement of an agreement between John Charcol and HSBC to provide whole of market advice to HSBC customers, followed closely by HSBC’s announcement that it is to offer 90 per cent LTVs. The latter naturally only being available to certain categories of HSBC customers although £1 billion funding has been allocated.
The intermediary industry’s reaction to the John Charcol deal has been generally negative, sometimes with a begrudging acknowledgement of Charcol’s ingenuity. The positive message is that HSBC have recognised there are many borrowers and potential borrowers who want to be able to access the whole of the market. Will there be more such deals agreed? It is difficult to predict but you can be assured a number of firms will be trying to find a similar route to potential survival in the difficult marketplace that abounds currently.
With HSBC being the only light of hope for increased mortgage funding at present, the harsh realities post-1st April is making life very much harder for firms to survive. The Government have failed miserably so far to stimulate any improvement in the availability of mortgage funding and the FSA have announced dramatically increased fees for many authorised firms, increasing the need for some firms to seek mergers or similar arrangements or to leave the industry. Add in the potential impact of the RDR and it is difficult to see light at the end of the tunnel.
But not everything is doom and gloom and the key factor is there is still consumer demand for quality mortgage advice and funding. Recent reports of the numbers of consumers seeking advice before deciding to purchase and/or possibly remortgage, alongside the estate agents also reporting an increase in genuine purchasers coming to market, has to have a very positive impact, with consumer demand driving improvements.
In tandem with the forthcoming FSA regulation of Sale and Rent Back businesses those borrowers in real trouble selling, with their lender’s support, to a sale and rent back provider could indirectly have a very positive impact on the overall quality of lender’s mortgage books, enabling them to obtain more competively priced funding as their ‘under-performing’ debts are removed. Thus increasing the mortgage funding available hopefully to the intermediary sector; the lenders still need this distribution capability in the medium and long-term even if they don’t totally realise it at present. One man’s loss is another’s gain they say.
Should we say that green shoots can be seen? It’s probably too dangerous a statement but at least there is seeds of hope. With the likes of the Association of Mortgage Intermediaries (AMI) delivering workshops designed as Sales Development Workshops utilising the services of an experienced sales trainer intended to help all intermediaries, either refresh, grow or learn more effective sales tools, there is plenty of stimulus to survive. The intermediary market has a reputation for survival, flexibility and down right determination to live up to. Let’s hope these positive moves are rewarded.
Q1. I have a client who is determined to obtain compensation from me for what is being claimed as bad advice. Without boring you with too much detail I arranged a mortgage for the client on a self-cert basis, after careful examination of the client’s inability to prove income in 2005. The client now claims that I should have recommended another product from the same lender with a lower interest rate. That product was not available to intermediaries in 2005. Why has it been so difficult to demonstrate to the Ombudsman that I fulfilled my obligations in terms of offering whole of market advice in compliance with the FSA s rules?
A1. From what you have sent me it is apparent that your client and perhaps to some extent the Ombudsman have been taking on board the client’s new broker’s comments and claims that you failed to offer whole of market advice and should have offered the client a direct to lender product as it turns out. The difficulty has been finding actual evidence that you were compliant at the time and didn’t have access to the direct product, which subsequently became available via the intermediary market.
The Ombudsman has taken a reasonable view and given you every chance to prove you were compliant and didn’t have access to the product I believe from what I have seen. You have now been able to find a statement issued by the FSA at the height of the ‘direct to lender product’ debate which seems to have been accepted by the Ombudsman. At the time the FSA said that it would be unreasonable for an intermediary to be at fault, if they had recommended the most appropriate product available to the intermediary at the time, which you did. As with so many complainants they failed to say how pleased they were to accept your advice at the time. The fact that you managed to obtain independent evidence that the direct product wasn’t available to you in 2005 has also helped. The fact you kept good records on file and could remember the case no doubt will also help when hopefully the Ombudsman reaches a final decision. The Ombudsman will always seek evidence to prove a point, so while it may have seemed it was being difficult its stance should help you.
Q2. I am a sole practitioner and have struggled to survive recently. I have let some of my record-keeping slip, especially my new business records. Should I go back and get these records correct or will the FSA take the view that I have improved now so it is not so much of an issue?
A2. I doubt the FSA would be very happy at all, especially as they have been consistently stating how important record keeping is since ‘Mortgage Day’ in October 2004. My suggestion would be you get your new business register up to date as a matter of urgency. If the FSA decides to call you or visit they will want to see a copy before visiting and will study the content.
