The mortgage industry’s response to Consultation Paper 186 (CP186) has been broadly positive. The Financial Services Authority (FSA) paper, laying out draft conduct of business rules for the mortgage industry, clarified a few of the more contentious issues.
Filtering questions as a separate advice category have been dropped, with the FSA opting simply for the categories of advised and non-advised. Sally Laker, managing director of network Mortgage Intelligence and a member of the Association of Mortgage Intermediaries’ steering committee, commented: ‘Filtered questions being dropped as a separate category clarifies the situation slightly, but I think they could still potentially cause confusion, if not handled correctly.’
Stuart Aitken, director of credit at SPML, applauded the removing of the ‘non-advised sales with filtering questions’ category. He was also pleased that the levels of adviser ‘independence’ would be brought into line with the investment market. ‘This means that advisers who deal with a small, but representative panel of lenders will still be classed as independent, which reflects the reality of the situation,’ he said.
Laker thought the definition of independence would comfort brokers but was surprised at the lack of a compulsory reasons why letter. The FSA will add the key facts brand to the initial disclosure and product illustration but has decided that the reasons why letter will not be compulsory. ‘It is actually one of the things that brokers already do, perhaps the FSA thinks the pre-application illustration (PAI) will cover that aspect sufficiently,’ Laker said.
Peter Tatum, head of compliance at LMS Packaging, also saw problems with the PAI. He said: ‘The PAI appears to be a very extensive document, and will require a lot of information to be gathered before any productive work can be commenced on behalf of the client. In cases where speed is of the essence, this could slow down the process in the early stages.’
Intermediaries will also be ‘grandfathered’ and will not be required to sit another examination, if they are currently qualified under current Mortgage Code Compliance Board rules.
Richard Hurst, communications manager at Future Mortgages, acknowledged the relief this would bring to intermediaries, adding: ‘More important than specific examples, in terms of a mindset the FSA’s seems in the right place.’