Mortgage News
Advisers back plans for suitability letters
Advisers have backed plans for suitability letters to be introduced as a means of improving advised sales standards in its feedback statement to the Mortgage Market Review.
The FSA is also hopeful that suitability letters will raise advised sales standards, and today’s feedback statement on the Mortgage Market Review shows advisers support the proposals.
Suitability letters are designed to provide better records of why specific advice is given, and bring mortgage advice into line with other areas, such as investments and pensions.
Respondents agreed lenders should take ultimate responsibility for ensure mortgages are affordable for their borrowers.
However, intermediaries and lenders disagreed on how best to assess affordability. While brokers and consumer groups supported a proposal to measure affordability on disposable income, borrowing capacity, reliability of income information and capital repayment, lenders suggested these measures might not be an accurate indicator of a client’s chance of default.
The regulator’s proposal to make income verification a requirement for all mortgages generated a polarised reaction. Those that supported the proposal argued everyone should be able to verify income, even if the income sources are diverse or the income streams irregular.
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Elsewhere in the feedback statement, the regulator said that firms must not add early repayment charges on arrears charges and interest levied on those charges.
It has clarified that firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears.
It will also oblige all firms to record all arrears handling telephone calls and to keep all records for three years.
Lesley Titcomb, director responsible for the mortgage sector at the FSA, said: “Today’s proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulties are treated fairly. Lenders need to be in no doubt of their obligations to customers who fall behind with payments and must realise that such circumstances are not an opportunity to create further profits.”
The document summarised the 178 responses received following the FSA’s Mortgage Market Review discussion paper that was published on 19 October.