An FCA survey into the Mortgage Market Review (MMR)-readiness of mortgage providers has shown 15 per cent of companies did not have firm plans in place for the new regime.
The majority of changes brought forward by the MMR will come into effect on 26 April. These include ensuring interactive mortgage sales must be advised unless the customer is a mortgage professional, a wealthy customer or a business borrower, and that non-advised sales are not permitted, although execution-only sales will be permitted under certain circumstances.
Although 1 per cent of respondents said they would not be ready at all by the April deadline, those are all small firms that have confirmed they will not be undertaking any mortgage business until they are ready.
Another 8 per cent of firms that returned the survey said they are not going to continue to conduct mortgage business: but the FCA claims it does not believe this is due to the MMRMost of these are small intermediary firms and FCA research showing business volumes indicates the majority of have written less than 100 mortgages in the past 12 months.
The regulator obtained responses to the survey from 3,600 mortgage intermediaries and 15 per cent of those cited disclosure as the number one area where they wanted more information, including verbal disclosure wordings and how fees should be disclosed. Other areas where intermediaries asked for further information included how to deal with rejected advice and evidencing consideration of eligibility criteria.
However, less than 4 per cent of the 172 lenders surveyed asked for any further information, indicating lenders now think they have a good understanding of the new rules. The FCA has said it will produce “more help, mainly for intermediaries.”
The purpose of the MMR is to tighten up the mortgage lending process and ensure widespread shortfalls do not occur again on the same scale the market has recently experienced. The regulator particularly cites risky lending and borrowing during the boom period of 2005 to 2007 as the context for carrying out the review and implementing new guidelines.
Mortgage adviser Alan Lakey, senior partner at Highclere Financial, believes the MMR’s introduction in April will mark a negative turning point for mortgage lending. “I think it’s going to be harder to get a mortgage, and the onus is now on the lender since the FCA has said if anyone gets into arrears it’s the fault of the lender,” he said. Mr Lakey added that it sets an uncomfortable precedent in the way mortgage applications are assessed.
“What we’re dealing with, in many instances, is a tick-box mentality. It’s a very dangerous place to be.“ One of the principal problems, he added, is that no two lenders will interpret the regulation in the same way, which will lead to an inconsistency of offerings across providers.