John Malone, Prudential Mortgage Services
At first glance I think that it appears to be a coherent, sensible document which looks as if it will help consumers and help intermediaries. It takes away industry anxieties about filtered questions, although it still does not insist that brokers produce ‘reasons why’ documents.
I can understand why the FSA does not want to include them, as many of the ones produced at the moment are of poor quality, but I think most brokers will (at the insistence of their compliance officers) agree that it is not something that they will have to do, but they will do so anyway because it is best practice. However, I think that there are some implications with disclosure as regards third party associations and the disclosure of payments.
Peter Tatum, LMS Packaging
One important point for packagers and brokers working in the non conforming sector is the requirement on debt consolidation. Here, a client must be supplied with alternative strategies and comparisons to securing the debt on the property. As many remortgages are expressly for this purpose, it may well have a negative impact on the level of business in this sector.
The largest benefit to the industry will be stability. Knowing the framework of the future regulation will allow the industry to start serious investment in the development of systems to achieve compliance with the FSA. I believe that many small firms will be daunted by the prospect of operating within the FSA structure and will choose to let larger firms shoulder the responsibility.
This will result in fewer, but larger firms, which will all become more professional in their outlook, which will in turn be good for the customer. And this, it is clear, is where the FSA is leading us.
Frank Thurlby, Genesis Home Loans
The potential confusion over non-advised and filtering questions has been cleared up and there will now just be the choice of advised or non-advised sales. I think there is more of an issue over mortgage risk and what constitutes a higher or standard risk.
The tone of previous consultation papers gives the impression that the FSA regards lifetime mortgages as a significantly higher risk and so it was no surprise that the FSA may introduce a further exam for brokers who wish to sell them. I think it may mean that brokers end up with a principal for standard mortgages and a principal for higher risk mortgages, which may put people off from selling lifetime mortgages.
I also quite like the initial disclosure document, as it is similar to the terms of business in the life and pensions industry. The key features illustration is a big issue, and the question is whether getting the information will slow the process down.
Ray Boulger, Charcol
It is clear the FSA has taken on board a lot of the comments in the feedback to CP146.
Non-advised filter questions were a key issue and the fact that there will now only be two types of sale now will make the process a lot clearer. However, it may still cause a bit of a problem for the lender market as they will probably want to offer a choice of either advised or non-advised sales. Their challenge will be to make sure that people understand what non-advised sales are. Past surveys show that just by asking questions borrowers can come away thinking they have had advice.
The other major issue for me is lifetime mortgages. They have been placed into the higher risk bracket as their sale requires greater expertise, but authorised brokers selling them must also consider selling home reversion plans too, which are not going to be regulated. The longer it takes the Government to regulate them the longer the period of time in which people have to sell unregulated products which could cause problems.
David Hollingworth, London & Country
I think the overall impression is that it is being well received. The standardised initial disclosure document will ensure that brokers offer consistent information, but the continued exclusion of reasons why documents is puzzling. I guess that in all likelihood that brokers will continue to produce reasons why documents because they could prevent potential complaints further down the line.
It explains why brokers recommended products, so I suspect a lot will want the security of being able to produce one should the need ever arise.