The recent increase in new mortgage broker networks, combined with activity around the FSA’s CP98 discussion paper on regulatory proposals, brings into focus the role mortgage networks may play in oiling the wheels of statutory regulation, when it comes into force during 2002.
Established mortgage networks are suggesting they could play a central part in helping lenders and brokers to meet the increased administrative workload the FSA regulation will bring. A few examples would be the lengthy and complicated pre-application illustrations, and the clearance of financial promotion material.
Hard-pressed lenders, faced with a potential mountain of extra compliance administration, would like nothing better than to hand over the bulk of the work to a third party (as CP98 allows them to do). But the buck stops with lenders, as it is clear that compliance responsibility can never be transferred to a third party. Lenders will not rush to employ third parties until successful precedents have been established and they feel satisfied the compliance administration will not leave them vulnerable or exposed to the wrath of the FSA.
Both lenders and mortgage advisers must keep an open mind about the future role of networks in the regulatory process. We all acknowledge what an essential role they play in the mortgage sale process, along with packagers and other mortgage wholesalers. For example, in the niche market, packagers are indispensable in providing a conduit for advisers’ cases, by preparing the documentation needed to ensure a speedy decision. This expertise could also provide an ideal skills base for compliance outsourcing.
Packagers, wholesalers and networks already use the strength of their bulk buying power to negotiate keenly priced products for their own broker base.
They also supply product databases, access to a wide choice of lenders and useful assistance in complying with the existing Mortgage Code. These well-established packager/adviser communication channels could easily be adapted to carry regulatory documentation between the adviser/customer coal face and the lender, adding to the existing value-added role they already play. It will require a leap of the imagination, a collective will and adaptation of existing administrative systems to enable this to happen, but this route should not be discounted. This would, in my opinion, seem to be a sensible and sound structure on which to build a framework to deal with future regulatory compliance requirements effectively.
Finally, a note of warning. The FSA, lenders, and the packager and network community already use web-based technology and communication channels as an everyday given, and the potential for speedy document and data transmission by email is limitless. Individual brokers must consider adding to their existing paper-based systems and get up to speed with the benefits technology can offer if they hope to ride the next regulatory wave to a safe shore.
