The Mortgage Event –An update from the FSA

Andy Turrell

Financial Services Authority

Agenda

• Our approach

• Our findings

• Current/future projects

• Available help

The change to our approach

• First 2 years– Time to let regulation bed-in – Focus on education– Giving you the help you need– Small firms web pages

• Going forward– We have set out our expectations and now

expect compliance– Give further help in further areas

Recent Findings- What you need to do

Disclosure – Ensure you:

• Results: 80% of firms have 5 or more errors on their IDD

• Have timely and accurate disclosure• Review FSA project results• Review FSA help for firms• Check compliance of documentation• Refer to FSA website for IDD, CIDD and KFI

templates + new Build your Own IDD

See Mortgage web pages – Disclosure

Affordability – Ensure you:

• Results: One-third of firms are not undertaking effective affordability checks

• Consider plausibility of information provided• Keep a record of income and expenditure

information• Check bank statements and other financial

information• Consider the effect of future changes

•See FSA mortgage and debt calculators (“Mortgages Laid Bare”)

Research – Ensure you:

• Results: 50% of files do not evidence that research was undertaken

• Adequately record why the recommended product was the most suitable

• Is the recommended product the cheapest option?

• What alternatives were considered if cheapest option not taken?

• Keep records of your reasons for recommendation

Suitability – Ensure you:

• Only recommend a product if it is suitable • Demonstrate the product you recommend

meets your customers needs and circumstances

• Record evidence to reflect the advice given

Lifetime Mortgages - Ensure you:

• Have appropriate procedures in place• Have advisers who are adequately trained

– E.g. tax / benefits position (FINTAL)

• Undertake a comprehensive fact find– discuss alternatives;– what the funds for;– changes to income; and– future plans

• Get independent legal advice• Involve family where appropriate

• See Mortgage webpages – Good practice

Upcoming Projects

• Quality of Advice Process• Self Certification• Sub Prime

Quality of Advice Process

Population:– 79 visits– 100+ mystery shopping– Banks, building societies, networks and

brokers

• Results due in the new year• Early findings

Self Certification mortgages - Ensure you:

• Do not overstate your customer’s income• Must still check affordability• Build in plausibility checks • Conduct detailed checks where necessary• Evidence why self cert recommended

– particularly if customer can prove income

See Mortgages webpage – Good practice

Sub prime mortgages – Ensure you:

• Results: 80% lack evidence of suitability• Maintain suitability records including:

– Full credit history– Existing lender details– Suitability letter

• Additional factors for debt-consolidation:– Cost of increased term– Secured lending and default– Negotiation with existing lenders

• See Mortgages webpages – Good practice

Use the available help

• Small firms web pages• Regulation round-up• Roadshows• Surgeries• Trade press• Training: workshops and e-learning• Firm Contact Centre: 0845 606 9966

Summary

• Review our project results to ensure you have made any necessary improvements

• We expect to see compliance in these areas

• Focus now on the process of giving good quality advice