In 2004, Facebook was launched, ‘Friends’ finally ended and Britney Spears got married; twice.
But overshadowing those events was MDay, the introduction of regulation into the mortgage industry.
It is hard to overstate the importance of MDay to the mortgage industry. It was, quite simply, the most important and far reaching regulatory clamp down that had ever happened.
MDay was long overdue. The fact that brokers could, up until MDay, advise on and sell mortgages without being regulated and authorised by the Financial Services Authority (FSA) looks archaic.
The other big change concerned documentation and processes. From October 31 initial disclosure documents were essential and Key Fact illustrations were not only a must but they had to come from a reliable source and within FSA tolerance levels. Providing a Terms of Business also became compulsory.
With hindsight, this seems breathtakingly obvious.
The MDay rules gained the industry more trust and business, but were not universally welcomed. To some, the new requirements seemed both onerous and expensive.
That isn’t to take the changes lightly. MDay did require investment on the part of brokers, and made substantial changes to the way they worked.
However, many of the requirements set out in compliance documents provided opportunities to improve service and information provided to clients and potential clients, by using available systems efficiently.
Improving the quality of service made the broker’s job much easier when the FSA came calling.
Given that premise, it wasn’t only the brokers who had to look to their laurels. Companies such as Mortgage Brain had to introduce new and improved software systems that were both fast and accurate, and met the needs of the new FSA rules.
Accuracy had to be ‘proved’ and the range of information enhanced. MDay was as much a challenge for mortgage software developers like ourselves as it was for any introducer.
An area of concern was if brokers could rely on KFIs supplied by sourcing systems. Given that, if things went wrong, the FSA would blame the broker and with tolerance levels of only 1%, you can understand their worries. Fortunately, the sector rose to the challenge.
MDay is the point at which mortgages grew up. The industry is indisputably in a far better place than before MDay and changes have been beneficial to brokers and consumers alike.
It is interesting to contrast the run up to MDay with the launch of MMR some five months ago. MMR was the biggest change to the mortgage process in the last decade and would not have been possible without October 31 2004.
The MMR saw one important difference, the relatively small amount of worry shown by the industry.
This may have been in part due to the fact that after the 2007 crash MMR was, self-evidently, a good idea, or that the reputation of the ‘finance industry’ was so poor that any grumbling would have been given very short shrift.
There was also one other important factor: MDay. Those who had been in the industry for a long time had been through one seismic upheaval and knew they could cope. And, more crucially, the technology to help make the change was already in place. Yes it needed altering to meet the new requirements, but the fundamentals were there.
The industry had used it for ten years, knew it worked and thus wasn’t scared of it.
Back in 2004 I wrote “MDay could prove to be far more beneficial than most care to admit.” Ten years on, I believe that more strongly than ever.
Mark Lofthouse is chief executive officer of Mortgage Brain