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Mortgage lending: intermediaries and the Mortgage Market Review

March 13, 2012 by sgiblin2

by Paul Scott, Director of Consulting

In this third of four blogs on the MMR I will cover the advice process and, especially, how this will affect lenders’ relationships with their intermediaries.

The crucial point here is that, ultimately,  lenders are responsible even where advice is provided by an intermediary. Where this is the case, if you are a lender, how can you truly make sure that the suitability of advice given by intermediaries is up to the necessary standards?

No longer will an arm’s length relationship with your intermediaries be adequate. What is needed is real assurance through proactive due diligence.

To be able to demonstrate the quality of business through intermediaries you’ll need to consider:

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Snails & mortgages: a lesson from legal case history

March 8, 2012 by Huntswood

Written by Paul Scott

Originally published by Thomson Reuters GRC. © Thomson Reuters.

Those with legal backgrounds might remember the story set in Paisley which started with a bottle of pop, a scoop of ice cream and a rogue snail. Poor Miss Donoghue was horrified when she slurped her ginger beer and ice cream float to find that a decomposing “gastropod” had housed itself in the bottle at some point in the bottling process.

These unlikely events were the making of the legal case which caused goods manufacturers to be responsible for the products they sold to customers, even if they had been sold through a café, or some other means of distribution. The manufacturer, Mr Stevenson, to his and the industry’s surprise, was found to owe Miss Donoghue a duty of care, making him ultimately responsible for the rather nasty consequences of her mollusc encounter.

It might seem unlikely, however, for snails to find their way into a mortgage product, and in many respects this is true: mortgage regulation does not have such a quaint reason for handing “ultimate responsibility” to mortgage lenders for the suitability of their products. Nevertheless, the outcome of the Mortgage Market Review (MMR) has effectively been such a shift, even if lenders distribute products through intermediaries. Unlike the 1930s drinks industrialists, however, lenders are not shocked by the direction the regulation has taken; although few are aware how to proceed or how quickly they should begin preparations.

The MMR challenge

Mortgages are closely followed on the regulatory radar and the landscape is changing. At a recent Council of Mortgage Lenders (CML) conference, delegates discussed the changing regulatory landscape for mortgages, and in particular, that the higher suitability standards found in COBS are being replicated in MCOB. Continue Reading »

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Training in Australia with the Olympic champion

March 5, 2012 by Huntswood

2012 is upon us and, as I’m sure every UK taxpayer is aware, that means it is Olympic year! The GB kayak team has already begun its Olympic preparations in warm weather training camps all over the world; I decided to fly out to the Gold Coast in Australia and spend six weeks training with my friend, Australian Olympic champion, Ken Wallace. This is going to be a big year for me, with a tough task ahead so I was keen to start it well. Great Britain has one spot allocated to it in the 1000m discipline and so this means that only the very best person in Britain will go to the Olympics. Unfortunately, there are no other spots as GB failed to qualify any crew boats and so this really is a tall order when you consider that the reigning 1000m Olympic Champion, Tim Brabants, will also be competing for that one place. The three selection races will take place in April and May this year.

I jumped straight into training whilst still recovering from the jet lag. Queensland is 10 hours ahead of the UK and the jet lag certainly causes some funny things to happen: it felt like my heart and lungs could not cope with the demands of my aggressive training regime. I fought to hold my own, despite struggling, until the end of the week which found me relying heavily on double espressos! The Australian national coach congratulated me on being one of the few Europeans to ever fully complete their first week of training out there and we all went out to celebrate.

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Section 166 – The FSA’s Diagnostic Tool of Choice

February 28, 2012 by Huntswood

by Gillian Megaughin, Senior Consultant. This article was first published in BBA Newsletter issue 122 February 2012

Section 166 of the Financial Services and Markets Act 2000 is probably the most well known section of the Act and it’s the section that you are most likely to experience in the coming years. There has already been a major increase in its use. The FSA invoked it 16 times in 2006-07, 88 times in 2009-10 and doubled this figure in 2010-11.

For those uninitiated in the world of skilled person reports from section 166 FSMA, the provision requires a firm to engage a third party to carry out a piece of work as scoped and requested by the FSA. The FSA will either appoint or approve the third party, but the costs will be borne by the firm. At the end of the process the skilled person will produce a report including the requisite findings and recommendations.

There are many ‘tools’ within the supervisory and enforcement toolkit, so why is this one so popular? How can firms ensure the best possible outcome if faced with the prospect of a section 166?

In general, skilled persons will be used when the regulator is unclear or uncomfortable with something it has discovered, or after a concern has been raised by a firm. This provision can also be used when the FSA leaves meetings with your firm’s senior management unconvinced by apparent regulatory rigour. Or the regulator may simply require an independent view of an issue, but lacks the resource or expertise to conduct the work itself.

Doctor doctor

The FSA is using its statutory powers to make home visits to firms to ensure the health of the industry, because as we know firms, like bodies, get into trouble from time to time. Hopefully, careful monitoring will allow for early identification of symptoms, but some go undetected and issues materialise. If a problem arises, firms should cooperate to ensure the best possible outcome.

A positive outcome at this early stage might mean that the regulator decides a formal skilled person need not be appointed i.e. the FSA might be satisfied with a ‘shadow section 166’. This is where the firm is asked to carry out the work itself without the need to formally engage a third party or for the FSA to produce a formal requirement notice. This will impress the FSA and decrease the risk of a regulator-appointed skilled person, where costs can be unpredictable. Getting an independent third party to verify your findings and evidence at this stage may well mean you are able to put the regulator’s mind at rest, and you can return to work with a clean record.

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Mortgage lending: the bar is moving up

February 22, 2012 by Huntswood

by Paul Scott, Director of Consulting

The FSA’s first attempt at the Mortgage Market Review was roundly criticised, so much so that Adair Turner took a personal interest, thinking it important enough to write the introduction to the latest Consultation Paper. This time, the proposals have received general acceptance, but will still mean major changes for firms. This is the first blog in the series on the MMR and, here, I will focus on responsible lending.

Forget the proposed new rules for a moment; our experience through engagement with major lenders is that the standards expected of firms has already increased.

One of our clients is currently facing major challenges around its advised sales process for mortgages. We have worked extensively with this bank to redesign, rebuild and embed a far more rigorous suitability assessment.

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The distributor’s dilemma

January 30, 2012 by Huntswood

This article was first published in FS FOCUS issue 56 www.icaew.com/fsf…

If financial advisers thought that they would be unaffected by the Financial Services Authority’s (FSA) latest intervention in product regulation, they will be disappointed. The regulator not only plans to tighten rule relating to the development of products, but also their distribution to customers.

The implications for financial advisers and planners are not exactly clear at this stage, but it could affect the number and range of products that they can sell, who they can sell them to and how. This environment is likely to favour firms with good client relationships, a deep understanding of their needs and effective segmentation processes in place.

From principles to rules

It is ten years since the FSA first launched its Treating Customers Fairly (TCF) initiative aimed at restoring customer confidence in the financial services industry. This was refined in 2006 with a list of six consumer outcomes to clarify the TCF objectives that firms should be working towards. Back then, FSA chairman Callum McCarthy hoped that this principles-based initiative would be sufficient to ‘incentivise’ providers of financial services to ‘act responsibly’.

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How to get a Consultancy job after you finish an MBA

January 12, 2012 by Huntswood

We have just entered 2012 and as an MBA student you are probably thinking it’s time to start the job hunt and if not, you should be! Competition is always fierce for the best jobs on the market and there are a few things to do before you start applying for them to give yourself the best change of success.

The first task is the most obvious but also the most critical: write a good CV. This is particulary important as this is a company’s first impression of you! You will find it easier to write everything you have done down first, then go through and add dates, company names and job titles. Be specific; include the countries in which you gained your experience and make sure there are no unexplained gaps in your history, detailing the month as well as the year is recommended.

Next add in your education. Include the date you started and graduated for every qualification including qualifications you received before you went to university (equivalent to UK A-Levels). You must include grades! All too often we receive CVs with no grades – some of these candidates had excellent results but had neglected to write it down. Employers always immediately assume the worst if you fail to include your grade.

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Posted in Huntswood, Huntswood Mangement Consultancy, Huntswood Recruitment, management consultancy, MBA | Tagged , , , , , , , , , | 1 Comment »

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