I have just spent this morning looking at the much anticipated new FSA proposals for the mortgage industry, which weighing in at 118 pages is a healthy size, (actually my scan reading powers were put to the test to be honest!)
Whilst the majority of the proposals in themselves are not unexpected, the key will be in their implementation to ensure they benefit not only the industry, but ultimately the consumer.
We all know that there has been a need for a while now to drive out the darker elements and re-professionalise the mortgage industry, especially at a time when more and more people need advice.
It is still too easy for people to walk directly into a bank branch and take out a loan without full independent advice.
The major talking point has been around Self-Certification loans where proof of income is not requested. Putting the onus back onto the lenders and making sure they check affordability seems a sensible move, though in reality the majority of lenders have already addressed this.
It is easy to get carried away with regulation after the horse has bolted, however, and whilst the buzzword is all about “responsible lending”, when used properly through approved brokers, backed up with sensible checks; there can be a place for self-certification.
We should not forget why self-certification was introduced in the first place, in order to help the many self-employed people, or freelancers, with irregular income who can clearly afford the loan but have issues ticking the traditional boxes. Arguably some self-employed customers with established businesses are a “safer” lending prospect than many who work on a pure employed basis, especially at the moment.
However, we all agree the concept was taken too far and became much too prevalent rather than being used as a well adjudicated lending tool. I would hope “fast-track” lending practices will follow suit with a return to good old-fashioned underwriting practices where applicant, broker and underwriter work together.
Ensuring Mortgage Advisors are individually regulated with the FSA, and the regulation of Buy-To-Let Mortgages are also moves that have been expected and ones that I expect most of the broker community to welcome.
There will be many who will say that such regulation will only serve to undermine any positive signs of recovery in the housing market and, in the short-term at least this could be the case.
It is essential that we look after the needs and requirements of 1st Time Buyers, the lifeblood of any full recovery, and the danger is that these changes are a prelude to more controversial policies of product regulation, for example introducing any limit on loan-to-value levels or income multiples. It is these types of changes, which will take away sensible underwriting policies, which could be really damaging.
As it stands, and the industry has until January 2010 to make their comments, sensible changes introduced now could mean that future growth is more sustainable and built on more solid ground.