On October 25, the FSA published Policy Statement PS12/16 - Mortgage Market Review. This 312 page document is the final stage in the review, and puts forward rules which will come into force in April 2014.
From our initial reading the Policy Statement contains no real surprises and is very similar in content to the Discussion Paper issued at the end of 2011. Pleasingly, the Policy Statement reaffirms the FSA's stance on the need for advice for the vast majority of mortgage sales.
We will be analysing the Policy Statement over the coming days and weeks and will be issuing briefing notes on this site in due course.
HAS THE MARKET SOLVED MMR ISSUES BEFORE THE REGULATOR?
Stephen Smith, director of housing and external affairs at Legal & General Network, asks whether the market has beaten the regulator to the punch over MMR.
Read Stephen’s article here (PDF 67kb)
The Network response has been submitted to the FSA within the required timeframe of 30 March 2012 and the next update from the FSA will be imminent. We'll of course update you as soon as we get some news. In the mean time, read Stephen Smith's latest article in Mortgage Solutions - A road to nowhere for mortgage prisoners.
The latest, and possibly the last consultation document from the FSA on the UK mortgage market was published just before Christmas, on Monday 19 December. Entitled, “CP11/31 Mortgage Market Review: Proposed package of reforms”, the core document runs to over 260 pages, with a larger number of pages in the appendices and the data pack.
Legal & General Network has a Working Party already established to review and analyse this paper. Over the course of the next three months, we’ll be developing our Network response to the questions the FSA has posed and will be starting to plan for the changes to systems, processes and procedures that may be required for our Network mortgage sellers. The closing date for the consultation is 30 March 2012. No changes are anticipated to the way intermediated mortgage business is carried out until 2013 at the earliest.
The FSA has maintained its objective of delivering a mortgage market which is “sustainable and works better for all participants”, and makes it very clear that whilst much of the poor practice which existed in the market during the period 2005 to 2008 has since largely disappeared, they want to ensure that poor practice amongst lenders and intermediaries never happens again, in whatever part of the market cycle.
There’s a good deal of detail to be sifted through, and this is a real consultation rather than an imposition of new rules, so what is set out here may change before finally being set into regulation, but the main headlines of CP 11/31 are as follows:
So some of the most contentious of the original proposals made a couple of years ago, such as the imposition of loan to value or loan to income caps, or the restrictions on the release of equity at the time of a home move have not been included in these final proposals. Nor is there any additional exam qualification needed for mortgage advisers or any changes to the descriptive labels which firms can use. The Initial Disclosure Document is made optional, although it is believed that most advisers will still make some form of written service disclosure, and there will be some changes to the trigger points for the production of a KFI.
Mortgage intermediaries will, as proposed in an earlier consultation document, be responsible for ensuring that their mortgage applicants fit the published criteria of the lender, but will not be responsible further for proving affordability.
At first reading, CP 11/31 seems to be a well reasoned and pragmatic set of proposals, much influenced by the lobbying work and responses from the intermediary and lending industry. With no major rule changes anticipated until 2013 at the earliest, we seem to have ample time to consider these proposals and plan for the changes we’ll need to make to how we go about our business.
Legal & General will produce further briefing notes on CP11/31 over the next few months. Any comments on this note, or suggestions for our response to the paper should be sent to email@example.com