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The Future Landscape For Mortgage Regulation

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I just read this speech on the FSA website. It is dated 20th October, but I couldn't see it having been picked up by HPC so I thought I would post a link here.

My link

Very sensible material delivered by Lynda Blackwell, Mortgage Policy Manager, FSA at the Building Societies Association Annual Mortgage Seminar. Here are some choice passages.

We believe that a robust and effective assessment of individual affordability has to underpin any sustainable lending model. When developing the current regime, we assumed that lenders would have a prudential self-interest to manage their credit risk responsibly and, therefore, prescriptive conduct requirements were not required. That has been shown to be a mistake and we are therefore proposing to be much more explicit about the standards we expect.
We have been surprised that our proposals have proved so controversial. We think that much of what we are proposing already exists – or existed – within firms. No doubt this is why many have characterised the proposals as simply marking a return to ‘sensible underwriting’ and common sense.

But others obviously feel very differently.

So what are the issues?

Discussions we have had with many firms have centred mainly on interest-only, which has caused much heat – although we have not yet consulted on our proposals! I think there has been a lot of unhelpful speculation about this.

Our proposals will be included in our November Consultation Paper (CP) and we will be very happy to continue the dialogue with you before finalising our approach.

Verifying income for the self-employed or those with irregular income also seems to be a particular issue for some of the bigger firms. But the self-employed and those with irregular income can still prove how much they earn – it may take them a little bit longer to get a mortgage but it doesn’t mean that they can’t get one. Some of the bigger firms have told us that making a basic lending decision about affordability in these cases is all going to be too difficult and risky and therefore they’d rather pull out than service the less straightforward consumer. So they were happy to self-certify – but not assess affordability properly.

We are doing some supervisory work on forbearance strategies and, as well as the issue about an increased use of capitalisation, that has raised concerns about some of the other strategies being used, for example:

* we are seeing the use of a switch to interest-only, followed by capitalisation of arrears after (perhaps as few as) three monthly payments at the new lower payment rate and no recovery of past, accumulated arrears; and

* we are also seeing the extension of the payment term into retirement without adequate consideration of the borrower’s ability to make payments of interest and eventual capital repayment in retirement.

With house prices expected to show further falls, unemployment expected to rise, and possibly some rise in interest rates to come, it is not clear that some of these initiatives are in the long-term interests of either party.

I look forward to the November Consultation Paper,

Q

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We do of course recognise that our proposals will have an impact on the market and we’ll be discussing this and the need for transitional arrangements

a fly in the ointment?

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...the problem is she is trying to impose changes which should already be in the industry if it was in any way sane and ethical ...there should be no consultation ...the proposals should be imposed ...and if it is true there is resistance ...I for one will not be putting money into any building society ....again the FSA are too weak and acting after the horses have bolted and since turned wild.... :rolleyes:

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Just thinking out load but why not go to the obvious extreme end of this and make it illegal to borrow to own a house? The average house price would fall to what the average person could save.

The next thing i think is it would be a problem for new build developers if prices fell to below the cost of building materials. But then if the issue is wages for builders who currently need a certain amount to be able to afford houses themselves because they are so inflated..... seems the whole value of money is tied to the cost of houses, our one and only huge purchase.

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.. seems the whole value of money is tied to the cost of houses....

...more so in the UK than say in Germany where it is quite normal to rent....suggest it's more about borrowing to gamble and speculate than owning a house ....it was ....not so much in a falling market except for certain thick types who think renting is dead money and HP always go up..... :rolleyes:

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Just thinking out load but why not go to the obvious extreme end of this and make it illegal to borrow to own a house? The average house price would fall to what the average person could save.

The next thing i think is it would be a problem for new build developers if prices fell to below the cost of building materials. But then if the issue is wages for builders who currently need a certain amount to be able to afford houses themselves because they are so inflated..... seems the whole value of money is tied to the cost of houses, our one and only huge purchase.

:rolleyes::rolleyes: Have said this many times.

House Prices = What the Moneylender decides to lend you. Therefore will be extortionately high. :rolleyes:

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yep. ban loans on houses. builders materials would fall.....ie, wages needed to support mortgages wouldnt need to be earned...I mean....didnt they have houses in China 20 years ago?...Houses that sell here for £400K, are they built with materials that cost SOOOO much more than the $150K houses they have in the US?

also, the facts she points out in arrears cases....the switch to IO, the capitalisation of arrears....these sound like the terrifying Option ARMS the US had in their sub prime.

then extending loans into pension territory....these are not the actions of responsible lenders.

And she is right...why are responsible lenders HAPPY for no income no docs loans, but are UNHAPPY about making a decision? smacks of the lax attitude of passing the buck to the clients pension fund that Securitization allows.

Commissions rule.

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  • 245 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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