It’s just over six months now until the implementation of the MMR. It’s easy to underestimate the effect that the MMR is going to have on writing mortgage business; let’s be clear, this will be the biggest change that we’ve seen since M Day back in 2004.
The MMR will touch on every single element of the mortgage process from first meeting the customer through to how you keep your records afterwards and how you report on this to the FCA – or, if you are a broker, how you provide evidence to a lender that you’ve written quality business.
While some organisations have gone some way to put plans in place to make sure they are prepared there are a number of organisations who are only part way there and are still trying to work out the implications and exactly what they are going to do about it.
Vizolution started to look into the impact of the MMR at the beginning of the year and the implications were so huge that it took almost nine months to gather the research and come up with some meaningful solutions to the issues that will be faced.
This culminated in a white paper - the first part of which was published at the beginning of September - as the implications are so far reaching that even this has had to be chopped into three parts.
We certainly believe that many of the issues raised by the MMR can be addressed with appropriate technological solutions which will help brokers and lenders continue to write mortgage business after next April.
Taking the advice process alone, the FCA predicts that currently 30% of mortgage sales are advised and that 70% will need to be advised post MMR - the only exceptions being "Proven High Net Worth individuals, mortgage professionals and customers needing loans for business purposes".
Our research revealed that a more realistic picture is that only 20% of sales are advised currently and that that once the MMR is in force, approximately 90% will need to be advised in order to comply with the new rules.
Although there is much to be said for the improved advice that customers will receive this comes at a significant cost in terms of the actual mortgage buying experience itself.
Customers who would historically have undergone a 15-20 minute non-advised process will now be forced into a 90-120 minute advised process instead. For the average customer it is estimated that the time taken for the advice process will increase by over 400%.
The challenge is how do you keep the customer engaged for that amount of time especially if the meeting is not face to face?
And then what documentation do you put in place to prove the advice process that you went through with the customer that they understood what you told them and that you did indeed give best advice?
From a broker’s view there will increasingly be a need to prove to lenders that you are providing good quality business and that you have gone through the correct sales process.
For lenders with a call centre team they will need to keep the client engaged throughout the process and be able to prove to the FCA that they have conducted the correct process.
Even where a mortgage sale is execution-only documentary evidence will be needed to prove that a client specifically asked to take out a mortgage via an execution only route and that the customer fits the FCA’s clear definition of a qualifying customer.
The technological solution for remote sales has to be screen sharing. With tailored screens, pre-approved by compliance, the adviser can take the borrower through the process in a visual way that can be time and date stamped while still talking to them on the phone.
With a tailored solution such as vScreen the adviserl is able to keep their client engaged and eliminate any breaks from the process with the secure transfer of files; which allows the customer to upload relevant documents such as wage slips and bank information, and the use of electronic signatures to remove the need to delay the process by posting the application.
The MMR certainly has the right objective at heart – to make it safer for a borrower to take out a mortgage by ensuring that they get best advice. The challenge now is making sure that lenders and advisers both have the tools to implement this without detriment to the customer or the adviser community.
