Speaking at the MICE CML conference, Sheila Nicoll, director of conduct policy, at the CML said there are a few aspects of the Commission’s proposal concerning stakeholders and the UK regulator.
“As originally drafted, it captures a number of areas of lending that we would classify as niche,” she said.
She continued: “These are areas that require a tailored approach that recognises their different characteristics. Given that cross-border sales in these types of lending is unlikely, we think it more proportionate to let member states deal with them at the national level.”
Nicoll failed to offer a time line for the Mortgage Market Review (MMR) paper but confirmed it would be coming “shortly”, spending more time outlining international regulatory issues.
On the EC Directive, disclosure continues to be a concern, she said.
“Our MMR research has highlighted that detailed disclosure does not always result in consumers taking in information or making better purchasing decisions. We have proposed changing our national approach so that disclosure focuses on giving the key messages at the key points in the mortgage sales process,” she added.
Another issue yet to be ironed out includes passporting European advice firms allowing them to advise cross-border. While bringing more consumer choice, current proposals suggest regulation should be conducted by the home regulator, not the host country, which troubles the FSA.
“Just as we would find it difficult to judge the dealings of a UK intermediary selling mortgages in Bulgaria, the regulator in Rome will find it hard to oversee the actions of an Italian intermediary active in the UK market,” said Nicoll.
Other proposals in the Directive include mandating rights including, the right to convert a foreign currency loan into a consumer’s home currency, the right to port a loan between different properties and to under or overpay.
Key but unfamiliar proposals for UK consumers include the right to transfer the mortgage to another borrower. The regulator said it disagrees these rights should be forced on and effectively paid for by all consumers.
“We think that the introduction of these rights will ultimately limit flexibility and choice for consumers,” she said.
Speaking more broadly, Nicoll outlines the FSA’s determination to ensure all forbearance is in the long-term interests of the consumer and that lenders to accurately report figures delineating the impact of forbearance.
“Without this, an adequate picture cannot be provided of the state of the firm’s loan book and particular vulnerabilities cannot be identified,” she said.
The FSA has produced guidance with four key actions for firms to ensure they act within this framework, she said.
Four key forbearance actions
– a firm-wide strategy for applying forbearance reviewed annually
– Firms should also review their existing arrangements in line with the good and poor practice examples outlined in the FSA guidance
– Firms ensure appropriate internal controls in place, and committee and Board reporting relating to forbearance
– Firms should report impairment where loans have been subject to forbearance
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