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  • FIRST POST
    • MSE Martin
    • By MSE Martin 12th Oct 04, 10:11 PM
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    MSE Martin
    A shameful piece of regulation
    • #1
    • 12th Oct 04, 10:11 PM
    A shameful piece of regulation 12th Oct 04 at 10:11 PM
    Finally mortgage broker regulation is coming into play, but there’s a big anomaly. !London & Country Mortgages is a broker which compares mortgages across the whole of the market. !Unlike the other big mortgage companies, it doesn’t charge a fee, just takes some cash from the lender. !Under the new FSA rules because it doesn’t charge a fee it can’t call itself Independent. !What a pitiful load of nonsense!


    For more info on mortgage brokers read sneakily get the best mortgage advice for free

    To discuss this click reply
Page 1
    • dunstonh
    • By dunstonh 12th Oct 04, 10:21 PM
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    dunstonh
    • #2
    • 12th Oct 04, 10:21 PM
    Re: A shameful piece of regulation
    • #2
    • 12th Oct 04, 10:21 PM
    Are you sure you have read it correctly?

    After depolaristion, IFAs are not allowed to call themselves independent if they do not offer the option for the client to pay a fee for their advice. ! So, if they offer the client the option of fee or commission, then they can carry on calling themselves independent.

    If your only option of remuneration is commission, then you will not be able to call yourself independent. !

    From 31st Oct, the same applies to mortgages. From 14th Jan, general insurance becomes regulated but there is no specific definition of how to call yourself independent.

    The two ares of concern to me are not what you highlight as really its a nothing issue which will effect no-one but that you do not need to be independent to call yourself an independent mortgage broker and there is no definition for independent general insurance.

    A large panel mortgage advisor who has a panel "which is a fair representation of the market as a whole" can call themselves independent.

    General insurance, by having no definition, is going to be open to abuse by people acting and talking like they are independent when they are not.
    • payless
    • By payless 13th Oct 04, 12:43 PM
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    payless
    • #3
    • 13th Oct 04, 12:43 PM
    Re: A shameful piece of regulation
    • #3
    • 13th Oct 04, 12:43 PM
    Yes, no fee brokers ( not just L&C but the thousands of no fee brokers ) just !need to offer a fee service - and in those cases rebate any commission earned, and if offering a marketplace ( or representation of the marketplace- now thats another story)- they can still be independent

    Might change they way we need to promote ourselves - its all about giving the consumer choice on how to pay for advice and transparency to the industry

    I can see how a large firm such as L&C could use this to their own commercial advantage.



    • payless
    • By payless 13th Oct 04, 1:53 PM
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    payless
    • #4
    • 13th Oct 04, 1:53 PM
    Re: A shameful piece of regulation
    • #4
    • 13th Oct 04, 1:53 PM
    representation of the marketplace- now thats another story

    Brokers can't be expected to tell customers of "exclusives" available via other brokers , but whilst these exclusives exist I do question whether any broker can say they advise on every deal available hence term " whole of the market " has a slightly different defination to what people might expect.

    Personally I would like to see brokers say , this is a list of providers we have access to and name the top 5 in % terms used in previous year.

    Also some lenders do not normally deal with brokers, or may be trying it out with one or two brokers -

    What annoys me most is one particular lender who has effectively said to me that unless brokers provide a certain volume level that they will not be supported- efectively blackmailing and saying "give us cases" even if we are not the best or we will take away your opportunity to place buisness with us .
    ( guess who refuses to be blackmailed)




  • Mortgageman
    • #5
    • 14th Oct 04, 12:41 PM
    Re: A shameful piece of regulation
    • #5
    • 14th Oct 04, 12:41 PM
    I just wanted to post quickly - I haven't really got the time today to give this subject the attention it deserves - I just wanted to make a few points.

    Our issue is really route to market - if you offer customers the option of charging a fee, then you have to make the fee clear in your adverts / marketing , which means we lose our USP

    It's not really a problem for us - we can either move to offering a fee based / comission rebate service, with the lowest fee (as we always work on low margins) or keep the fee free banner - we're already pretty sure of what we are doing, but here is probably not the time or place to discuss it - I will let the people on this board know first of course.

    Independent is, at the end of the day, just a word. I think there will be the need for journalists like Martin to teach consumers that this particular word has lost a lot of it's value - not because of the fee thing, but because of the panel thing - I've had a chat with a few people in the industry, who reckon you can succesfully argue that the top 5 lenders are a representative panel - doesn't sound too independent to me!

    Don't forget, this regulation is going to hit the fee charging brokers more than anyone - they are going to have to increase there fee by 0.35 basis points, just to remain where they already are (because at the moment they keep the comission, but post reg they will have to rebate it) so it will be interesting to see what it will do.

    On the whole, I think it's going to be good for the consumers - all they need to do is follow the true moneysaving principle of shopping around - there should now be more clarity.

    This has turned in to a much larger post than I originally intended - I just wanted to add my pennys worth anyway.
  • Robert_Sterling
    • #6
    • 14th Oct 04, 2:11 PM
    Re: A shameful piece of regulation
    • #6
    • 14th Oct 04, 2:11 PM
    representation of the marketplace- now thats another story

    What annoys me most is one particular lender who has effectively said to me that unless brokers provide a certain volume level that they will not be supported- efectively blackmailing and saying "give us cases" even if we are not the best or we will take away your opportunity to place buisness with us .
    ( guess who refuses to be blackmailed)
    Is the answer all IFAs?
    • payless
    • By payless 14th Oct 04, 2:26 PM
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    payless
    • #7
    • 14th Oct 04, 2:26 PM
    Re: A shameful piece of regulation
    • #7
    • 14th Oct 04, 2:26 PM
    Is the answer all IFAs?
    Not all IFAs are mortgage advisers, and not all mortgage advisers are IFAs

    discussed http://forum.moneysavingexpert.com/cgi-bin/yabb/YaBB.cgi?board=Mortgages;action=display;num=109627 7219
    --

    But back to your point- I don't know. Whilst they allow me to transact business with them I will use them , if they are the most suitable for that client, but I won't be blackmailed into placing business with anyone.

    If they play silly, then I will take them off my list - if I can still call myself independent (representation of market) then I will ( and make a point of saying that , that particular lender is not included and why)

  • mr_mortgage
    • #8
    • 29th Oct 04, 1:39 PM
    Re: A shameful piece of regulation
    • #8
    • 29th Oct 04, 1:39 PM
    Finally mortgage broker regulation is coming into play, but there’s a big anomaly. London & Country Mortgages is a broker which compares mortgages across the whole of the market. Unlike the other big mortgage companies, it doesn’t charge a fee, just takes some cash from the lender. Under the new FSA rules because it doesn’t charge a fee it can’t call itself Independent. What a pitiful load of nonsense!
    DISCLAIMER: I have worked on this piece of regulation for a major high street mortgage lender for over a year. I know inside and out the FSA rulebook, known as PS186.

    It is not mortgage brokers who are being regulated, it si the whole of the market. The main impact as customers will see things is in the disclosure segment of mortgage origination. Basically, the illustrations, offers and payment notices. A broker will only be dealing with the illustration. Anyway, enough with the technicalities.

    A broker will have to give a customer a document which is called an "Initial Disclosure Document" (IDD) and on this IDD it will tell the customer if they charge for advice, or receive commission from the lender (and not charge the customer directly). It will also tell them if they are selecting mortgages from a portion of the market, or the entire market. This is what makes a broker independant. It is nothing to do with how they charge the customer whatsoever... if they get commission and charge no fee but select from the entire market - they can be considered independant. This is for the benefit of the customer, and is as clear as day.

    Illustrations from a broken (called "Key Facts Illustrations" from now on) will also detail exactly how much commission the broker will receive for selling the particular mortgage. Enducements (such as free golfing days out for hitting targets) will also have to be disclosed.

    So, please, please do not thing that just becasue a broker does not charge a fee directly to the customer they are not independant. The fee situation does not relate to the independance situation at all.

    Feel free to bounce any questions my way ... happy to answer as best I can. PS186 (Volume 2) is 500 pages long, so there are plenty of questions to be answered!

    Regards,
    Mr Mortgage (sorry, I had to create a new account to protect my identity on this one, don't want to rile my employer - I can't speak offocially for them).
    • payless
    • By payless 29th Oct 04, 2:10 PM
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    payless
    • #9
    • 29th Oct 04, 2:10 PM
    e: A shameful piece of regulation
    • #9
    • 29th Oct 04, 2:10 PM
    This is what makes a broker independant. It is nothing to do with how they charge the customer whatsoever
    Not sure I agree fully with the above, it is one of the 2 factors

    http://www.fsa.gov.uk/mgi/guide_part2.pdf !( a summary of the rule book/ guide for small firms - although would be interested if you feel this version is different to the full rule book)


    sect 2.2.4 ! I think makes it very clear

    What must I do if I want to describe myself as ‘independent’?
    2.2.4. If you wish to describe yourself as ‘independent’ you must intend to:
    (1) offer a whole of market service; and
    (2) give the consumer the option of paying a fee that will be the only remuneration
    you receive for the service (MCOB 4.3.7R). If the consumer exercises this option, you will have to pay them any commission you receive on the mortgage
    sale

    ------------
    So as well as offering the "whole market" all they need to do is also offer the option to pay a fee, no always charge one
  • Robert_Sterling
    Re: A shameful piece of regulation
    I have never liked the use of the term "Independent" in relation to Financial Advisers as it has a "positive" connotation. I would prefer to call the present IFAs Financial Advisers and the one's who are not "IFAs" Sales Staff for Norwich Union or whoever.
  • mr_mortgage
    Re: e: A shameful piece of regulation

    Not sure I agree fully with the above, it is one of the 2 factors

    http://www.fsa.gov.uk/mgi/guide_part2.pdf ( a summary of the rule book/ guide for small firms - although would be interested if you feel this version is different to the full rule book)


    sect 2.2.4 I think makes it very clear

    What must I do if I want to describe myself as ‘independent’?
    2.2.4. If you wish to describe yourself as ‘independent’ you must intend to:
    (1) offer a whole of market service; and
    (2) give the consumer the option of paying a fee that will be the only remuneration
    you receive for the service (MCOB 4.3.7R). If the consumer exercises this option, you will have to pay them any commission you receive on the mortgage
    sale

    ------------
    So as well as offering the "whole market" all they need to do is also offer the option to pay a fee, no always charge one
    It seems you are correct. However, that PDF file is nothing like the rule book... the rules are here: http://www.fsa.gov.uk/pubs/policy/ps186/
    Volume 1 is rather dull, providing a hundred or so pages of overview - whereas the reat guts are in volume 2 - all 500 pages of it. It's meaty stuff.

    The independence thing which incluces a fee must be a relatively new inclusion (perhaps between Consultation Paper and Policy Statements - basically a CP is issued, feedback from lenders given and eventually a PS is made when banks have already done most of their preparation based on the CP!). I have dealt mainly with post-sales and servicing issues, so this could have slipped through my net. However, "independence" is pretty subjective, IMO. If a broker selects from the whole of the market and does not charge you a fee (and they will clearly tell you this on the IDD) then you know what you are getting and are free to make a decision to proceed fully aware of what is being offered.

    In a nutshell, PS186 attempts to make everything clear to a customer. The IDD spells out exactly what services the customer is being offered. The KFI (new style quote) shows in great detail a particular mortgage which is in the same format across all lenders so the customer can easily compare mortgages. If you want to see what a KFI looks like, check out the Bradford and Bingley Marketplace web site - it looks like they have introduced their KFI early (no FSA references, and two sections missed out - they are not allowed to introduce these until M-Day). It's very good - it will tell you how much per pound you will repay, it shows very clearly the ERCs associated with the mortgage (Early Repayment Charges).

    In short - the customer will have a much better idea of what they are being offered and can make the choice which is best for them. "Independence" really does not have much to do with it, an independant broker will not have access to all products on the market anyway - you may have to go to Charcol to get certain exclusives, anyway.
    • payless
    • By payless 29th Oct 04, 2:53 PM
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    payless
    Re: A shameful piece of regulation
    It seems you are correct
    !

    yes sect 4.3.7 of that larger document covers the same point that I made.

  • mr_mortgage
    Re: A shameful piece of regulation


    yes sect 4.3.7 of that larger document covers the same point that I made.
    I never claimed to be infallible !

    As I said, I mainly have worked on my clients post-sales area, so am not so au-fait about brokers WRT PS186 - but one thing PS186 is NOT is mortgage broker regualtion. Broker regulation is just a part of the whole set of rules.

    On the whole, I think the rules are very good - and will be beneficial to the consumer in a big way. Since the KFI must be perfect and describe the mortgage to within a pounds error the customer has good recourse if something does wrong.

    The only problem is that since the government wants all these tight rules in, someone has to pay for it... and it can't be the banks. In the end, the consumer has to pay and for my client, the programme so far has cost them about 60 million GBP - much of this will have to be recouped somehow. However, my client is not putting up its rates - which is exceptionally good of them.

    Also worth noting is that Abbey have withdrawn their flexible mortgage product and First Direct and Direct line have completely closed their book. You can easily tell who is prepared for this and who isn't.

  • mr_mortgage
    Re: A shameful piece of regulation

    Nice to see an actual working IDD - personally don't like the tick box ( hence showing - unticked , the options that don't apply- could be confusing to some) but seems the way we must go
    You won't see a working IDD until Sunday - what you would have seen is a kind of de-regulated KFI (a KFI with section 1 removed, and some other FSA logos). The tick boxes are prescribed by the FSA but it looks like B&B have misinterpreted a tiny bit, you don't need to have an empty checkbox - an absence of one is better. We didn't like them much either - we are producing the KFI for customer using PDF documents and use a tick which is big, clear and does not look confusing at all. It can also be saved easier by the average customer. We've made sure it's very simple!

    Interesting to see list of lenders on the site you mention - long but a I see 1 really major player not included.
    Well, I don't know what backend the B&B use for sourcing those quotes, but if it's based upon Trigold or Mortgage Brain data then quite a few lenders have removed some feeds to them recently, just to be on the safe side in the run up to M-Day. Expect everything to explode into action on M-Day (besides poor old Abbey National who won't have their flagship flexible product ready) and then again on GI-Day in the New Year.
    • payless
    • By payless 29th Oct 04, 3:23 PM
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    payless
    Re: A shameful piece of regulation
    I never claimed to be infallible !
    none of us are
    • payless
    • By payless 29th Oct 04, 3:28 PM
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    payless
    Re: A shameful piece of regulation
    The tick boxes are prescribed by the FSA but it looks like B&B have misinterpreted a tiny bit,
    I agree absence of the "unticked" info would be cleaner - from what I have seen most brokers are using this method-
    I am still waiting confirmation from my outsourced compliance firm if I can get rid of unwanted info on my version.
  • mr_mortgage
    Re: A shameful piece of regulation
    I agree absence of the "unticked" info would be cleaner - from what I have seen most brokers are using this method-
    I am still waiting confirmation from my outsourced compliance firm if I can get rid of unwanted info on my version.
    When in a PDF, it's quite obvious... but on a HTML IDD (which is not available online just now) having an unticket checkbox gives the customer the impression that they could change the advice level on the web site, which of course they can't.

    The FSA are (rightly) very strict as to the layout and wording of the IDD and KFI. There is very little room for changes.

    MCOB 4.4.1R(1) - Annex 1R - [PS186 Volume 2, pg. 98] clearly shows empty boxes where a tick should go. The reason for this, I expect, is that in a bank where a sale may be provided on an advised or a non-advised basis the seller will manually tick the appropriate box. I expect that this means in a HTML based IDD a box of some description will be required, and many people seem to have taken this as an unchecked checkbox - which I think is a bad idea. Just a plain old box woudl have done the trick. Oh well.
    • dunstonh
    • By dunstonh 31st Oct 04, 2:42 PM
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    dunstonh
    Re: A shameful piece of regulation
    Out of interest, does this now mean that mortgage brokers will have to be careful in future about how they answer questions on here regarding mortgages in the same way IFAs and tied advisors do regarding regulated products?

    ie, not being able to give recommendations or advice but "suggesting areas to investigate"

    • payless
    • By payless 31st Oct 04, 8:10 PM
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    payless
    Re: A shameful piece of regulation
    Don't some of us already do!
  • mr_mortgage
    Re: A shameful piece of regulation
    Out of interest, does this now mean that mortgage brokers will have to be careful in future about how they answer questions on here regarding mortgages in the same way IFAs and tied advisors do regarding regulated products?

    ie, not being able to give recommendations or advice but "suggesting areas to investigate"
    If they are giving advice in their official capacity, then yes.

    Imagine a broker speaking to their friend in the pub about mortgages - they would not need to give an IDD to their friend. It would be absurd - they are not operating with their broker hat on.

    But if they are, then yes - they would need to provide the customer an IDD on a durable medium. The customer must explicitly accept this (you can't say "click here" to agree with the document which is behind this like - which of course the customer never reads).

    It's a complicated matter - but in my opinion, a broker would be well advised not to offer advice on a specific mortgage to a customer on a bulliten board. It's a bit of a grey area.

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