At the CML MMR conference this morning, Michael Coogan, director general of the CML, said there is a real, tangible risk that unintended consequences in the MMR will undermine the FSA’s work since the crisis hit in 2007.
He said: “The first and most compelling is that the MMR on its own is largely irrelevant in addressing past areas of consumer detriment. Cumulatively, with other regulatory and prudential changes in development, there is a real, tangible risk that unintended consequences in the mortgage market will undermine the FSA’s good work since the crisis hit in 2007.”
Coogan admitted the market would not need a review if some lenders with high risk strategies had not forgotten the basics of pricing for risk, effective credit underwriting, and controlling the application process.
He explained: “Those lenders were found out, and are now largely out of business, but the remaining lenders who lent responsibly have to deal with the regulatory consequences.”
He said that the CML had not seen the evidence to back up the proposals in the discussion paper.
He added: “We will obviously argue against unnecessary regulatory intervention, for example conduct of business based regulation of the buy-to-let market.”
Coogan said that his short summary of the core problem in the market would be irrational borrowers with multiple debts.
He added: “The MMR produces no solution for this group of consumers, but a wider remit on all forms of credit would give the FSA and firms the consistency and transparency in regulation to instil market confidence. The current hotch potch of regulators and regulatory approaches is a mess – no wonder it does not serve consumers well.”
Coogan concluded that he hoped the market would not be limited to the privileged few who have parental support, never lose their job and have usual financial needs.
He added: “Once we had a mortgage market which was the envy of the rest of the world. It is still not too late to revive the patient – if the regulatory treatment is focussed on the real market ailments”
