In the first of our Compliance Corner series, Tim Chapman considers the effect that the upcoming Mortgage Market Review is likely to have on the marketplace. He also looks at the issues the MMR will present within compliance and risk.
This week sees the launch of our new series, Compliance Corner. Each month we’ll be looking at hot topics and trends within compliance and risk and sharing our insights into the impact they could have on the industry.
This month Tim Chapman considers the effect that the Mortgage Market Review is likely to have on the marketplace.
Transforming mortgages from unobtainable to sustainable?
The mortgage market has come under intense scrutiny over the last 5 years. With inflating interest rates, unaffordable deposits and problematic payment plans, British consumers have voiced their concerns and woes, and the FCA and marketplace have responded.
From 26 April 2014, the Mortgage Market Review will come into action. No longer will mortgages be a simple sales process where adequate data and money in the pot equate to a mortgage being granted. Mortgage suppliers will have to be able to provide a mortgage advisory service and support in addition to the mortgage itself. Improvements in customer service and TCF principles will be abundant, but the act alone presents various issues for the industry.
What issues will the MMR present within compliance and risk?
The review itself looks closely at the affordability of mortgages through the prism of customer service. Customers will need to evidence that they can afford the mortgage with apparent proof of income throughout the process, and that interest-only mortgages can be presented to individuals as long as a payment plan which is satisfactory and realistic, within the eyes of both the lender and the customer, is agreed upon.
However, this alone presents the mortgage industry with a multitude of problems. The FCA has dictated that “most interactive sales (for example face-to-face and telephone) must be advised, unless the customer is a mortgage professional, a high net worth mortgage customer or a business borrower”. Mortgage advice being offered in-house with all mortgage sales is, on the one hand, an attempt to guard against borrower fraud, but from the FCA and providers’ point of view, it is a chance for them to objectively observe and assess all applications within the framework of regulatory guidelines.
To provide advice, the vast majority of advisors will have to possess CeMAP qualifications to guarantee an excelled understanding of mortgages and the risks that surround them. To ensure that providers comply with guidelines and customer expectations, the marketplace will see a large push to develop advisors and mortgage professionals in accordance with the changing landscape.
Will it work?
In principle, yes. Mortgage advisors are not new to the marketplace, but now being an integral part of the sales process creates an extra layer of protection for customers and lenders alike. The advisors will be up to date with regulatory changes and will mitigate risk for all parties. This should protect both the mortgage and the housing market overall and will hopefully prevent the post-2007 housing crash from reoccurring.
At Grovelands we always want to hear from you. What impact do you think the MMR will have on the marketplace? Will it affect your role directly? Will it affect your company? Tell us your thoughts in our LinkedIn group.