Member Article

The Mortgage Market Review. Are you ready?

With the implementation of the changes from the MMR imminent, being ready is essential. With such big changes, BancTec’s Amandine Poirier outlines what your business needs to put in place to make sure you are ready.

With the outcomes from the MMR set to come out later this month on the 26th April, the FCA have altered the focus back to consumers. Designed to prevent excessive or risky lending by mortgage providers, the new checks and processes lenders have to follow will reduce the amount of money people can borrow, while extending the process through greater checks and assurances. The MMR will bring a number of changes, and lenders need to be ready for the following:

1. Staff must be properly qualified and trained to be selling mortgages. All staff are required to hold a professional qualification of QCF level three certificate status.

2. A ban on non-advised sales has meant lenders now have to have a dialogue with customers before they can sell them a mortgage. The idea behind this is that during each conversation and advice period, the sales person will be able to assess customer suitability. This ensures a customer cannot simply walk into a mortgage lender’s office and walk out with a mortgage they cannot repay. Although this could be more time consuming for the salesperson, it will ensure lenders are lending to people who can keep up their mortgage repayments. There are opt outs that the borrower can invoke to avoid the advised process, however for the typical consumer seeking a mortgage these will not apply unless the full sales process is online or they are have a very high net worth

3. Introduction of an affordability assessment and a ban on self-certification lending. The seller now must carry out a full assessment of the borrower, ensuring they meet full eligibility criteria, again aiming to avoid lending to people who cannot repay mortgages. This, combined with a ban on self-certification lending, requiring a mandatory income verification will ensure lenders are not selling to people who cannot afford repayments.

4. Mandatory interest rate stress tests. Before a mortgage is approved, a lender must take account of the impact of changing interest rates on mortgage repayments for the borrower. This will again help to prevent unsustainable loans no matter if interest rates rise.

This large number of mandatory extra checks will mean the lender needs to gain proof of everything the customer states, inevitably increasing the time and investment required from the lender in each sale. However for many already carrying out appropriate checks on lending, the MMR regulations will make little difference to their practice.

5. The initial disclosure document (IDD) has been scrapped. The IDD has previously provided an outline of services to be supplied by the lender. This has now been scrapped to make way for a requirement for firms to disclose key messages to customers, rather than through a single generic document full of jargon. The way the facts are to be presented to the customer is to change, to reduce an information overload on the customer.

This change in paperwork, will in terms of practice make minimal difference to the lender, however it is change you need to be aware of and be ready for when the MMR comes into effect.

The repercussions for not adhering to the MMR have not been announced but it is safe to assume that those who do not follow the guidelines set above will be heavily fined, therefore being ready is critical. The next date for our diaries will be the end of 2014, when the results of the MMR will be released.

By Amandine Poirier, Product Marketing at BancTec

This was posted in Bdaily's Members' News section by BancTec .