Name: Alison Beech
Company: Spicerhaart
By extending regulation to focus on the acquirers of portfolios, borrowers may benefit from being better protected against unfair charges. The recent GMAC-RFC fine, and the indication that there are more to follow, should leave no doubt that the FSA intends to have a sharp focus on charges incurred by borrowers in arrears.
Mortgage portfolio trading is an important feature of the industry but some borrowers may have been disadvantaged by the new owner imposing excessive fees, particularly if the acquirer is not a lender.
The Council of Mortgage Lenders (CML) and the Association of Finance Brokers (AFB) support the regulation of second charge mortgages rather than simply transferring oversight of the current regime to the FSA.
There has been a well-voiced view that all secured lending should be the subject of the same regulatory framework as the risks to the borrower are the same for both first and second charge lending.
Buy-to-let mortgage sales are often treated as regulated so extending regulation to this area would simply formalise the current process. However, buy to let can be a commercial investment vehicle for a borrower and extending regulation into the commercial lending arena would set an unwarranted and unwelcome intrusion. It would widen the scope of regulation into market risk rather than consumer protection.
The Treasury seems to want to protect investors from making ill-considered property investment decisions but regulating the sales process will not address this.
Name: Ian Gray
Company: Large Mortgage Loans
The lack of regulation around the securitisation market was a contributing factor to the current situation, not least because it affected the lending policies of the originating lenders. Some of those lenders knew that the risks they were entering into would be passed to another entity altogether.
A considered approach to regulating this market, which allows for the movement of capital and easing of tight credit conditions, will be a stabilising influence which we need.
Second charge loans, when granted on residential properties, should absolutely be subject to the same regulation as first charge residential mortgages. Consumers can still lose their homes by defaulting on second charge loans which means we need to afford them the same protection as on first charge mortgages.
The buy-to-let market should be considered for regulation, mainly because of the culture that developed in the last decade in the UK around this type of lending.
The typical lender criteria had been, and in some cases remain, completely reliant on a monthly flow of rental income to service the debt.
While this allowed people with limited means to generate wealth from the property boom, it failed to address the risks they were taking in the event of void periods or a downturn in the market. Many have had to walk away from their properties since the crunch.
It could be argued that these landlords fit the FSA’s definition of a “retail client” which requires a higher duty of care.
Name: Neil Warman
Company: HML
The benefits of standardised regulation across mortgages, second charges and buy-to-let lending have been well discussed in the industry for a number of years. The general view has been that it is inevitable.
Whether this would bring more stability to the housing market is questionable, but it seems reasonable to suggest that it would make things simpler for borrowers who have these products.
Certainly from a marketing perspective it makes life a lot more straightforward when you consider the complexities that different regulatory regimes bring to things such as product advertising.
To have everything under the FSA regime would be a positive development and would sit well with its goal of making promotions clear, fair and not misleading. The subject of extending regulation to cover acquirers of mortgage portfolios is a newer development. However, the trading of portfolios is nothing new.
Past activity was largely driven by lenders looking to grow their asset base or balance up their portfolio with certain loan types while not originating them directly. Today there are a number of people interested in buying mortgage assets on the basis that the loans can represent good value. We will watch with interest to see how this plays out.
After five years, it is to be expected that the FSA’s regulatory regime will evolve and adapt to market conditions. Positive change that is developed and adapted in consultation with the industry should be welcomed.
