Independent review and analysis

Mortgage Market Review – behind the headlines

FCA review

Over a month has now elapsed since the implementation of MMR and the news headlines are proving interesting. The national press is concentrating on how intrusive the information required by lenders is when assessing client’s income and particularly expenditure behaviour. The answers to these questions subsequently determine the amount clients can borrow. The trade journals seem to report an upsurge in broker introduced business based on the fact that mortgage interviews are taking twice as long as before MMR and the in house capabilities of lenders are “stretched.”

In March this year the FCA gave a clear indication as to their areas of focus for the coming year. The guidelines were issued with the full knowledge that an early autumn thematic review of how successful the implementation of MMR was, had already been scheduled in.

One area of review will be companies with large back books must not be acting against their existing customers’ best interests. As an example, the FCA does not want to see unfair prejudice against existing customers, simply because they are trapped in a product. Although the new MMR rules may seem to rule out product switches on affordability issues, for some existing borrowers “common sense” should be applied.

Lenders also need to support existing customers in arrears, by fair treatment of individual cases based on their specific personal and financial circumstances rather than a “one policy fits all” approach.

Clearly over the next few months it makes sense to review policies and procedure covering arrears management, product transfer and lending into retirement rules to ensure they comply not only with the “letter” but also the “spirit” of new regulation.

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