Last Marketwatch, we asked networks how the industry was coping and to highlight the main compliance challenges.
This week we’ve asked firms badged MCD market leaders by distributors to give us an update and explain how these lenders gained the edge over other lenders.
Paul Darwin, head of intermediary relationships at Skipton Building Society, describes the gap analysis which helped the lender flush out key areas for compliance focus
Maeve Ward, sales and operations director, secured lending, Shawbrook Bank discusses the lender’s broker education programme and their next plans of attack
Simon Carr, sales development director at Precise Mortgages, explains how Precise embedded first charge principles into its seconds from launch handing it a haedstart and lays out the biggest MCD challenges ahead
Having seen the commercial benefits of being ready for the Mortgage Market Review (MMR) it was a logical move for Skipton to take the next major wave of regulation, the MCD, in its stride. Having quickly established a stakeholder project team, undertaken a gap analysis of the main requirements we were able to flush out fairly early on the key question we needed to answer around whether it should be KFI (Key Facts Illustration) Plus or ESIS (European Standardised Information Sheet). This initial decision was very much driven around systems capability and resource to deliver our chosen route, but being mindful of other IT priorities and BAU (Business as Usual) projects in the pipeline.
Once we knew the direction of travel, other decisions around whether we should offer foreign currency loans, whether we would participate in the consumer buy-to-let market seemed to flow quite naturally.
As the saying goes ‘the devil is in the detail’ and MCD has been no different.
A sensible and pragmatic approach to interpretation of consultation papers and rules, as well as engagement and sharing views with the mortgage industry, other lenders, distributors and associated trade bodies like the Council of Mortgage Lenders, Intermediary Mortgage Lenders Association and Association of Mortgage Intermediaries have all helped shape our views around binding offers, periods of reflection and transitional arrangements.
Our next major step focuses on communication both internally and externally. We want to minimise any potential disruption to our borrowers, our brokers and business volumes in the run up to 21 March 2016 and beyond.
Our aim is to keep all parties informed of any changes to our processes every step of the way.
We put in place a long lead time for the new regulatory regime, which we fully embraced and aligned to, because a key Shawbrook focus is the support we offer to our brokers. This has been demonstrated in Summer 2015 by the series of educational ‘Shawbrook Academies’ we ran across the country to assist brokers through the regime changes and to help them understand what the new rules will mean in respect of their business operations.
Our ability to support our brokers is a critical component of how we manage our business and we built our operating platform in preparation for the MCD over 12 months ago to ensure that the impact for both us and our prepared broker partners is minimal. Much of what is being driven from the MCD we have already embraced and embedded within the system, for example, the consolidation of credit directly, stress testing, income and expenditure. Our platform is fully integrated with third party providers which means less wait time and hand-off for brokers as we connect instantly to Equifax for automated decisions, Land Registry which removes human error associated with keying information into documentation, and Quest which enables valuations to be done online.
There’s a little bit more to do: we need to change the existing credit agreement and mortgage and replace with an ESIS and a binding offer. In the main we are there, guided by our principles of keeping the needs of our broker partners at front of our mind in order to pave the way for a fulfilling and rewarding customer journey when the MCD goes live in March 2016.
When I am asked why Precise Mortgages is well prepared for the arrival of the Mortgage Credit Directive (MCD) I consider the actions we have taken, historically, to answer this question.
We knew that our launch into the second charge market would be regulated by the FCA. When we decided to apply the same principles around affordability checks as those used in the first charge market and gave the customer the choice on how they paid any fees it was considered over the top by some in the industry but in my view it was responsible and transparent. Because of this forward thinking we now find ourselves with a small number of changes as a result of our previous actions.
Second charges will have to change from credit agreements regulated by the Consumer Credit Act to regulated mortgage contracts and we’ll be required to produce an ESIS – no other approach exists. Whereas for first charge regulated mortgage contracts, you have to move from a KFI to a KFI plus or ESIS, to ensure all mandatory information is made available to the consumer at the appropriate point in time. In both cases we are simply changing a document.
APRCs for firsts and seconds is a requirement – that’s just a calculation to be added to your choice of ESIS or KFI plus.
We all have to get used to a reflection period so that is a simple change in process.
The biggest challenge has been defining what constitutes a consumer buy-to-let versus a buy to let. The answer is out there and we have a well-defined approach.