If you ask members of the public what comes to mind when they hear the words mortgage broker you are likely to get a mixed response. Some, usually the more astute purchasers of financial products, will give a fairly accurate definition. They will understand that a broker offers a range of products that are drawn from several lenders and that the advice given is impartial, to a point. They will also be aware that the adviser receives a fee from the lender whose mortgage product they are purchasing.
But a vocal and increasingly influential minority are highly critical of mortgage brokers, intimating that too many are not offering a good service. This latter observation is a million miles away from the truth. Unfortunately, it is an image that has been seized upon by the national media, politicians and regulators alike. The passion these groups have displayed for attacking the mortgage broking community is staggering and there are no signs that such assaults will dry up.
However, the overwhelming majority of brokers would agree that there are a number of areas that do need to be changed ‘ especially issues such as pre-sale disclosure and the types of advertising that is used to target potential borrowers.
Yet the broker’s voice is hardly heard in the stampede that usually follows the publication of a government report or a consultation paper from regulators such as the Financial Services Authority (FSA), or the Office of Fair Trading (OFT). When it does register, the message is often unclear and when several brokers are consulted, the results are usually contradictory.
Why? Because most mortgage brokers look at regulation through parochial eyes. What trends are apparent in London are often different to trends experienced in the north of England or Scotland. So, when they do give an opinion ‘ and it is usually only the 40 or so biggest brokers that have the resources to table responses ‘ they are invariably ignored.
If the broking community is to prosper then this situation cannot be allowed to continue. Brokers and IFAs have a critical role to play in the mortgage industry, and as the interface between consumers and lenders, the view of the intermediary should always be acknowledged. Unfortunately, this rarely happens.
A classic example of this is the recent publication by the FSA of its Mortgage Sourcebook consultation paper. The report ‘ all 420-plus pages of it ‘ was unveiled a few weeks ago. It has far-reaching implications for anyone involved in the selling of mortgage products ‘ regardless of whether they are a lender or an intermediary.
Lenders have the Council of Mortgage Lenders (CML) and other bodies such as the Intermediary Mortgage Lending Association (IMLA) to assess the pros and cons of this weighty paper. However, brokers have no-one to turn to who is able to issue guidance and co-ordinate a response that captures their views.
This current state of affairs is not the fault of the Government or the FSA. However, it is critical in the current climate that when new regulations are placed on the statute books they make sense and do what they are meant to ‘ that is offer consumers the greater protection. The current period for consultation by the FSA is just three months and it is unlikely it will be able to deliver the results everyone is hoping for, first time round.
In just three short months, every broker and IFA is being asked to digest and understand the FSA’s proposition and then to issue a detailed response. Brokers are expected to outline which proposals they agree with, which ones they do not, and critically what alternative proposals they would like to offer to the financial services regulator for consideration.
It sounds such an easy task. However, the reality is different to the theory.
A similar situation arose back in July 1997, when the OFT issued a set of guidelines for all lenders and intermediaries who were involved in the selling of non-status mortgage and loan products. That document also had a limited consultation period. The end result was that very few brokers and intermediaries were able to contribute. This meant the OFT rushed through a set of guidelines and then, shortly after they were unveiled, had to revise its newly published rules before re-publishing them again four months later. Had there been a greater emphasis on speaking to brokers and intermediaries initially, then the chances of this situation occurring would have been reduced.
The way the FSA has handled the situation surrounding its proposed Mortgage Sourcebook has a number of similarities with this example, which is why it is imperative mortgage brokers and IFAs have their own trade body to co-ordinate a response. The National Association of Mortgage Brokers and Advisers (NAMBA) ‘ a new trade body representing the broking and adviser community ‘ will be doing its utmost to convey the thoughts and proposals of brokers and IFAs to the FSA in time to meet the September deadline.
NAMBA is currently developing a remit for the planned official launch in January 2002. However, the body is currently courting the views of the broking world so that those people currently selling mortgage products face-to-face with the public can have their say and help to shape the thinking of regulators.
Over the next few months, NAMBA will also be discussing an overhaul of the Consumer Credit Act (CCA) ‘ a statute that is commonly used to transact mortgage business ‘ with the OFT. When this Act became law, no-one envisaged that the CCA would be the subject of widespread use by specialist lenders and intermediaries ‘ particularly those operating in the lucrative sub-prime and non-conforming niches ‘ when writing first and second charge business.
But billions of pounds worth of mortgages are written every year ‘ even though the public and their legal representatives are often bewildered when instead of being asked to sign a detailed mortgage contract the CCA is put before them. It is little wonder that consumer groups ‘ and some off-message Labour MPs are pressing for changes to this particular Act.
That the OFT and the Government has at last listened to these calls ‘ and at last set up a formal review of the CCA ‘ is welcome news. However, NAMBA will be doing its utmost to ensure that any changes in the act will have long-term benefit and not be designed to make short-term headlines.
These are just two examples where membership of NAMBA will be of real benefit to brokers and intermediaries. For with the right kind of lobbying arm, NAMBA believes it will be able to make a difference to Mortgage Sourcebook and also amend the CCA so it represents the best interests of consumers and the lending industry alike.
But NAMBA does not intend to focus all of efforts on lobbying the regulators and the Government. It is also considering whether to offer support to brokers who need to come to terms with the Mortgage Code
Compliance Board’s (MCCB) new training regime.
Any broker who has attempted to get some guidance from the MCCB, only to be met with the response that the MCCB does not issue guidance, will understand this. Although it is at a tentative stage at the moment, the body would like to develop a training desk that steers members safely through the issues surrounding CeMAP and MAQ.
NAMBA has a long road to travel between now and 1 January 2002 ‘ not just with the compliance and training desk concept, but with a plethora of other projects as well. But if the overwhelming majority of the broking community supports not only its formation but also the stances it is looking to take and the campaigns it hopes to fight.
There is a real need for change in the mortgage industry, changes that are long overdue. But lasting change can only be achieved through the inclusion of all parties ‘ especially the broking community.
When that happens, and NAMBA becomes the major catalyst in delivering the changes we all seek, the vocal minority of consumers who have repeatedly attacked this sector will start to see the real value that honest brokers deliver every day of the week to their clients.
Brokers have three months to study and respond to FSA’s regulatory proposals.
NAMBA is in the process of speaking to brokers, before issuing a unified response to the FSA paper.
NAMBA will also help brokers through the MCCB’s new training regime.