The reporting implications
This is the first of our commentaries on the detail behind the MMR, designed to highlight the less obvious effects on lenders, home finance providers or loan administrators.
The MMR project is not just a date in the diary when changes should be implemented, but an ongoing process, that will need embedding in firms business as usual systems. An example of this is the new rules on data collection which were announced in December 2013 and will come into effect in January 2015 for mortgage lenders and loan administrators. There are two main areas of change.
1. The Product Sales Data (PSD) return which has been in existence since 2005 will be enhanced and split into two separate parts.
- Sales data. This includes the characteristics of the mortgage, such as the size of the loan, type of interest rate and information on affordability, such as income and expenditure.
- Performance data. This includes details of the characteristics of the mortgage such as the outstanding balance, type of interest rate and information about payment difficulties and forbearance. This data will be reported on a regular basis throughout the lifetime of a mortgage.
2. The Mortgage lenders and administrators return (MLAR) will be changed to include more information on subordinated loans, an analysis of the credit risk requirements and confirmation that the firm complies with the new liquidity resources requirement.
These returns are part of a stated aim by the FCA to monitor and supervise compliance with the MMR and to ensure that mortgages are affordable. The regulator will use data to link payment difficulties with the original sales process and monitor treatment of borrowers in arrears.
The enhanced reporting process will have a resourcing effect on a number of businesses in the sector; not just lenders. Rockstead has considerable experience working with various companies in the provision and verification of accurate data, entirely appropriate for this new reporting regime. Starting now and working in partnership with us, to verify the correct data controls and internal procedures, will make the transition to the new reporting environment more effective.