Paul Crewe, managing director of Smart Money, calls for the second charge market and the Financial Conduct Authority to continue to stand together when it comes to regulation.
I’m pretty sure that we’ve all experienced our fair share of jobsworths or read about some ridiculous examples of overbearing bureaucracy and red tape. Of course living and working within a state of lawlessness is certainly no answer, which means that certain rules and regulation do have their place – if planned and implemented sensibly.
Formal regulation has long been established within the mainstream mortgage market, particularly in recent times in preparing for and dealing with the Mortgage Market Review and now the Mortgage Credit Directive. Now, not only is the second charge industry coming through this challenging period relatively unscathed but it has also worked to forge an increasingly closer working relationship with the regulator. To its great credit the regulator’s role in this transitional phase has been a positive one. It has interacted more with the industry and taken on board some concerns along the way.
We’re all aware that this sector is currently in the midst of a Financial Conduct Authority overhaul. And, come April 2016, the sector will fold into the Mortgage Conduct of Business Rules, meaning all lenders and brokers will need to apply the same affordability assessments and stress tests as the first charge market.
On the whole this full integration into the main regulatory framework has been met with overwhelming support throughout the second charge marketplace. However, moving into any new period of regulation inevitably gives way to some degree of apprehension due to a certain danger that some positive features could be lost by unnecessary layers of bureaucracy.
Fortunately the FCA appears to be continuing to listen to the industry, and this is highlighted by its recent decision to no longer require second charge lenders to obtain the interest rate on a client’s first charge mortgage. In truth the extra time required to verify clients’ interest rates on their mortgages could well have made the process laborious and unwieldy and this shift in stance makes perfect sense and underlines the much needed common sense attitude illustrated by the regulator.
While assessing affordability is a crucial area, by reviewing this part of the directive proposals, the FCA has provided clear guidance and forestalled an unnecessary brake on the speed with which applications can be approved. Also it can no longer become a potential means by which existing first charge lenders can ‘hold up’ clients in their desire to raise capital by not responding to requests quickly.
Looking forward, let’s hope that the industry continues to embrace these outlined changes in a positive manner. And that the FCA also maintains this flexible attitude to ensure this full integration will prove to the success it currently promises to be.