The Mortgage Event – An update from the FSA Andy Turrell Financial Services Authority

Agenda Our approach Our findings Current/future projects Available help

The change to our approach First 2 years –Time to let regulation bed-in –Focus on education –Giving you the help you need –Small firms web pages Going forward –We have set out our expectations and now expect compliance –Give further help in further areas

Recent Findings - What you need to do

Disclosure – Ensure you: Results: 80% of firms have 5 or more errors on their IDD Have timely and accurate disclosure Review FSA project results Review FSA help for firms Check compliance of documentation Refer to FSA website for IDD, CIDD and KFI templates + new Build your Own IDD See Mortgage web pages – Disclosure

Affordability – Ensure you: Results: One-third of firms are not undertaking effective affordability checks Consider plausibility of information provided Keep a record of income and expenditure information Check bank statements and other financial information Consider the effect of future changes See FSA mortgage and debt calculators (“Mortgages Laid Bare”)

Research – Ensure you: Results: 50% of files do not evidence that research was undertaken Adequately record why the recommended product was the most suitable Is the recommended product the cheapest option? What alternatives were considered if cheapest option not taken? Keep records of your reasons for recommendation

Suitability – Ensure you: Only recommend a product if it is suitable Demonstrate the product you recommend meets your customers needs and circumstances Record evidence to reflect the advice given

Lifetime Mortgages - Ensure you: Have appropriate procedures in place Have advisers who are adequately trained –E.g. tax / benefits position (FINTAL) Undertake a comprehensive fact find –discuss alternatives; –what the funds for; –changes to income; and –future plans Get independent legal advice Involve family where appropriate See Mortgage webpages – Good practice

Upcoming Projects Quality of Advice Process Self Certification Sub Prime

Quality of Advice Process Population: –79 visits –100+ mystery shopping –Banks, building societies, networks and brokers Results due in the new year Early findings

Self Certification mortgages - Ensure you: Do not overstate your customer’s income Must still check affordability Build in plausibility checks Conduct detailed checks where necessary Evidence why self cert recommended –particularly if customer can prove income See Mortgages webpage – Good practice

Sub prime mortgages – Ensure you: Results: 80% lack evidence of suitability Maintain suitability records including : –Full credit history –Existing lender details –Suitability letter Additional factors for debt-consolidation: –Cost of increased term –Secured lending and default –Negotiation with existing lenders See Mortgages webpages – Good practice

Use the available help Small firms web pages Regulation round-up Roadshows Surgeries Trade press Training: workshops and e-learning Firm Contact Centre:

Summary Review our project results to ensure you have made any necessary improvements We expect to see compliance in these areas Focus now on the process of giving good quality advice