Sinclair also repeated his criticism of the Financial Conduct Authority’s (FCA) execution-only plans and said he had seen a shift in the way the regulator was operating.
Speaking at the AMI annual dinner, Sinclair suggested the FCA had changed its approach to helping mortgage prisoners from a smaller targeted one to a pan-industry solution.
He warned that this could have significant effects on lenders trying to implement changes which are likely to mean a more practical method of affordability assessment.
“I thought they were going to hot-house a solution with a small range of lenders and brokers to deal with those people who were caught in the back books sold by UK Asset Resolution to a range of owners who are not regulated,” Sinclair said.
“Instead we’ve now got a wholesale change where lenders have to make a choice about whether they disassemble their affordability models for those prisoners to remortgage.
“That’s going to be a big choice for big lenders as they will build post-dated systems which will be complex, while smaller lenders will find manual underwriting much easier to do, and be much quicker and fleeter of foot.”
Sinclair was concerned that this divergence could lead to different incentives operating for different lenders.
“For lenders that means an uneven playing field,” he continued.
“Since the last crisis we have as a trade body talked about having a level playing field, equality and we tried to make sure that people could compete on that level playing field and in fairness.
“I’m not sure where that stays now,” he added.
Execution-only limit ‘in black and white’
Sinclair reiterated his concerns about the FCA’s proposal to encourage great use of execution-only in the mortgage market.
He said he would not apologise for calling the regulator “disingenuous” and rejected the FCA’s claims that the Mortgage Market Review (MMR) had not intended to restrict execution-only.
“When the MMR was brought in in 2014 they did say that they wanted to limit execution-only because there was too high a risk to consumer detriment – it’s there in black and white,” he said.
This, he noted, included technological and online solutions, which the FCA disputed in the Mortgages Market Study.
“It’s interesting that the people who were architects of the MMR are no longer at the FCA and corporate memory may not be all that it could be,” Sinclair continued.
“That’s never a defence for a regulated firm nor for the regulator. So I am concerned about that justification in order to say why this change needs to happen.
“There is no justification [for encouraging execution-only] other than the fact ‘we didn’t mean it’ or ‘we never said it’.”
Detriment or harm
And Sinclair also observed that the FCA had moved its oversight approach from consumer detriment to consumer harm, introducing it “into their language without any explanation”.
“Why are we moving from detriment to harm? In my view detriment is quite tangible – you have to prove that somebody has lost something or suffered. Harm is more intangible,” he said.
He highlighted that this moved it more to a principle-based rather than outcome-based approach, making it more forward thinking, but this brought a tougher challenge of predicting where it might go.
