FSA recommends changes to mortgage sales process

Proposal follows responsible lending advice

The Financial Services Authority (FSA) of UK has outlined proposals which focus on enhancing the mortgage sales process, the role of intermediaries and improving disclosure of information for customers.

The consultation builds on the FSA's Mortgage Market Review to date, and a key element is requiring that those selling mortgages ensure that each one sold is 'appropriate' for the customer's needs and circumstances, therefore clarifying the role of the mortgage seller (both intermediary and branch based).

This follows earlier proposals by the FSA which looked at responsible lending and the role of the lender and the customer, and which set out that the responsibility to assess whether a customer can afford a mortgage ultimately lies with the lender.

In addition key proposals include: replacing the obligation to issue an initial disclosure document to the customer with requirements to clearly and prominently disclose key information about how the intermediary will be paid and the service they offer; changing the trigger points for providing the Key Facts Illustration to minimize information overload on consumers and reduce burdens on firms; and a requirement for all individuals that sell mortgages to hold a relevant mortgage qualification ensuring appropriate professional standards across all sales.

The proposal also includes replacing the existing labels used to describe the firm's service with the Retail Distribution Review's 'independent' and 'restricted' labels; and requiring firms to disclose to customers whether they will consider deals that can only be obtained directly from a lender.

FSA director of conduct policy Sheila Nicoll said this next step of the Mortgage Market Review recognizes the importance of the intermediary and ensuring the quality of every mortgage sale.

"It also indicates how the intermediary and other sales staff fit into our vision of a sustainable mortgage market that works well for consumers.

"By clarifying the role and responsibility of mortgage sellers, we are removing the blurring that could take place between the role of seller and lender," Nicoll said.