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FSA recommends changes to mortgage sales

This follows earlier proposals by the FSA which looked at responsible lending and the role of the lender and the customer, and which set out that the responsibility to assess whether a customer can afford a mortgage ultimately lies with the lender.

In addition key proposals include:

•Replacing the obligation to issue an Initial Disclosure Document to the customer with requirements to clearly and prominently disclose key information about how the intermediary will be paid and the service they offer;
•Changing the trigger points for providing the Key Facts Illustration to minimise information overload on consumers and reduce burdens on firms;
•A requirement for all individuals that sell mortgages to hold a relevant mortgage qualification ensuring appropriate professional standards across all sales;
•Replacing the existing labels used to describe the firm’s service with the Retail Distribution Review’s ‘independent’ and ‘restricted’ labels; and
•Requiring firms to disclose to customers whether they will consider deals that can only be obtained directly from a lender.
Sheila Nicoll, the FSA’s director of conduct policy, said:

"This next step of the Mortgage Market Review recognises the importance of the intermediary and ensuring the quality of every mortgage sale. It also indicates how the intermediary and other sales staff fit into our vision of a sustainable mortgage market that works well for consumers.

By clarifying the role and responsibility of mortgage sellers, we are removing the blurring that could take place between the role of seller and lender."

Stewart Baseley, Executive Chairman of the HBF said;

“Of course lenders should lend responsibly and the FSA has a responsibility to regulate that lending. But these disproportionately severe proposals would have implications far beyond that and risk destabilising the already fragile housing market still further. The social and economic implications of delivering fewer homes at a time where we already have an acute housing shortage are dire.”

Sarah Webb, CIH chief executive, said:

“There is a clear need for better mortgage lending.  However, the proposals in this consultation will prevent many households who could service a mortgage from realising their aspirations to become home owners.  Furthermore there is a real risk that these measures will undermine what is already a weak housing market – putting jobs and homes at risk.  This isn’t just a case of closing the door once the horse has bolted, this will make matters worse.”

Elizabeth Richards, Head of Legal & Policy at NFoPP, comprising both the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents (ARLA), said:

"These proposals may seriously undermine the mortgage market.  The National Association of Estate Agents (NAEA) attributes the decline in both buyers and sellers during the past few months to restrictive lending criteria.  These new regulations have the potential to exacerbate this problem. Loans to first-time buyers are considerably lower than at this time last year, and the NAEA believes that these new proposals will prevent even more people from buying a home."

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  1. Major Landlord says:

    It is very revealing that parties with vested interests in re-inflating the housing bubble are so against these sensible proposals. The truth is, it was the free-for-all launched by irresponsible lenders, aided by unscrupulous intermediaries, and supported by greedy developers, estate agents and letting agents that caused the housing meltdown in the USA and UK – which then triggered the global recession.

    Have we learned NOTHING? Should we allow borrowers to lie about their earnings and source of deposits, in order to borrow more than they can afford to repay? Should we allow lenders to lure borrowers into over-borrowing by offering initial throwaway rates, followed by exorbitant reversionary rates? Should we allow housebuilders and agents to continue building property that we don’t need, with false promises of inflated investor returns that will never materialise?

    OF COURSE NOT. The government MUST bring sanity back to the housing market, and the starting point is sensible, regulated lending. The more money that enters the housing market, the more prices will be inflated. Anyone who argues against this is just in it for their own selfish ends. And anyone who falls for their hype only has himself to blame when the consequences come knocking at his door . . .