Last week, the AMI seminars – which took place during the Manchester Mortgage Business Expo (MBE) 2012 – included a focus on fraud, an exploration of Manchester’s role as a microcosm of the wider financial landscape and a discussion of some of the more contentious areas of the MMR. Miranda Atty takes a closer look at some of the seminars’ most salient points...

Regulation – Learning from MMR feedback with Lynda Blackwell from the FSA

Brokers in the north are reportedly experiencing a harder time than in the south – with frustration arising from lenders restrictive criteria, making it difficult to place cases. Manchester is a microcosm of the wider financial landscape, in terms of falling house prices, negative equity and reduced public spending power – adding a topical relevancy to Lynda Blackwell’s FSA speech which flagged potential changes resulting from the MMR and European Mortgage Directive.

Lynda, speaking on behalf of the FSA’s Conduct Policy, highlighted the MMR’s aims to achieve commonsense principals of underwriting, namely affordability assessments, stress testing and capital sum repayment.

By combining the above, it is hoped that lenders and brokers will share joint responsibility for ensuring the client is able to service the loan.

Concerns about how the FCA will apply the new MMR rules in practice and during the transitional period were raised, and, ultimately, it was established that the FSA needs to address being too restrictive on financial markets as this will prevent adequate growth.

The most controversial part of the MMR appears to be the proposed removal of non-advised sales; only 70 per cent of lending is currently advised so there are still a huge number of borrowers not receiving any advice.

During this seminar it became clear that lenders agree advice should be given as part of the loan sale process. Most lenders also already do give advice, even though it is not mandatory. The consensus appeared to be that removal of non-advised sales will give consumers more confidence and encourage them to begin to borrow more.

However, the MMR still needs to clarify why non-advised/advised sales should be branded differently when advised methods are already largely employed throughout the market.

Mortgage fraud – developments and the latest updates with John Malone from Sesame Bankhall Group

John Malone, the broker representative in the Mortgage Fraud Forum, revealed some startling statistics about the growing level of fraud in the UK. Back in 2010, the country fell victim to £38 billion of fraud overall (not mortgage fraud specific). However by 2011, it is estimated there was £73 billion of fraud taking place in the country.

According to John, many intermediaries are in denial about the effect fraud has on their businesses. Highlighting the complexities of modern fraud, he said, “Intermediaries have little chance to work out what is fraudulent,” particularly when police themselves often struggle to always know what is genuine.

On the subject of whether Appointed Representative networks or Directly Authorised firms are more responsible for fraud, John implied that responsibility is equally weighted. He did stress that it is the ‘dabblers’ (i.e. those who don’t specialise but dip into specialist sectors of the market from time to time) who are most likely to be involved, either directly or indirectly, with fraudulent applications.

These markets include BTL, equity release and bridging. Likening the BTL arena to self-cert and highlighting coercion as a potential issue in equity release, John also suggested that some bridging deals could be being used “by intermediaries to buy properties in a way which is self-cert or sub-prime”.

Whilst commending a vast improvement over the last 12 months with regard to solicitors – mainly due to lenders’ decisions to carry out due diligence and reduce their panels – he stressed there has been some mixed info concerning valuers, largely due to back book valuations now being exposed. Lenders are looking at valuations very closely in bridging, particularly to make sure an individual is not pushing a valuer to make a deal work.

Lenders’ panel; A panel Q&A session with representatives from Barclays, GE Money, Nationwide Building Society, Virgin Money and Platform

During the session, a question surrounding the need for packagers was raised. Mark Snape, of GE Money, commented, “They are absolutely needed. There are more specialised offerings and the MMR should embrace them. The recovery will be intermediary and broker led.”

Richard Tugwell, of Virgin Money, added: “When it comes to packaging, quality of case submission is crucial. There is a need for better customer service and a better approach needed.”

On the subject of proposed regulation of BTL, Nationwide’s James Chidgey said, “Regulation would deter would-be investors. BTL has been a huge contribution to the PRS and is the only sector which has seen an increase year-on-year. Since 2011, it has risen 50 per cent. Regulation would strangle BTL.”

However, on the other side of the coin, Lee Gladwell of Platform argued that, “There is a case for more control. There is scope for debate as to how to control BTL. Stressed control as opposed to regulation. The MMR is good but it is addressing the issues we saw in ‘07 and ‘08. BTL should be self-regulated.”