The Mortgage Event – An update from the FSA

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

2. Agenda • Our approach • Our findings • Current/future projects • Available help

3. 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

4. Recent Findings- What you need to do

5. 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

6. 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”)

7. 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

8. 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

9. 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

10. Upcoming Projects Quality of Advice Process Self Certification Sub Prime

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

12. 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

13. 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

14. Use the available help • Small firms web pages • Regulation round-up • Roadshows • Surgeries • Trade press • Training: workshops and e-learning • Firm Contact Centre: 0845 606 9966

15. 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