Bob's Blog

November is always a month which seems to figure prominently in the mortgage industry; this is the case for a number of reasons including the fact it is often the month when detailed plans are put in place for next year, it is the last ‘full month’ of the year prior to the interruptions of the holiday season and therefore advisers are looking to maximize business levels, and quite specifically for mortgage stakeholders it is also the month of Mortgage Business Expo – an event which, regardless of the state of the market, does bring the great and the good of the industry together.

Within the mortgage industry we already have much food for thought with the publication of the FSA’s MMR: Responsible Lending paper – a Policy Statement on this is expected in Q1 2011. 

However, there will be additional information to dissect re: MMR in November with the expected publication of the FSA’s paper on distribution and disclosure issues. 

If the proposals outlined in this paper are anywhere near as, for want of a better word, ‘controversial’, as those in the responsible lending missive then we will all be pondering increasingly seismic changes to our industry for many a month to come.

Regardless of the content of next month’s paper, November does signal the starting pistol for many, both in terms of how they plan ahead for 2011 and beyond and how they intend to cope and meet the expectations and responsibilities of MMR. 

We should not forget that regardless of other issues, one major change directed by MMR for mortgage advisers, which is likely to have a 31st March 2011 implementation date, will be the requirement for all individuals to be approved persons. 

The new controlled function (CF31) will be introduced along with a requirement for the individual responsible for compliance in relation to home finance activity to be registered as CF10 – the current FSA controlled function for a firm’s compliance officer.

Individual registration of mortgage advisers has seemingly been on the agenda ever since the FSA disbanded with the idea prior to ‘Mortgage Day’. 

Now, the world has turned full circle and the regulator has decided that it can, and perhaps has, to make regulation work at an individual level if it wants to ensure that the ‘unsuitable’ element are not allowed to work in the sector. 

All this means that advisers will find themselves in the area of Criminal Records Disclosure (CRB) checks and having to submit Individual Approved Persons Application forms.  November should see the FSA publish its final rules on this and launch the MRR approved persons webpage.

CRB checks may seem like a straightforward process, however, for sole traders and directors of single director firms who are applying for approval for the first time, there are complications. 

Notably the fact they will need to submit a standard disclosure from the Criminal Records Bureau which will show all spent and unspent convictions plus they will need to register with an umbrella body via which the check can be obtained. 

This means the process will take that much longer for this group of people – estimated at eight weeks – which means the need to register early with an umbrella group becomes much more pressing.

All others not in the sole trader/single director category will be required to submit a basic disclosure which will only show unspent convictions.  This process does not require registration with an umbrella organisation, can be done via an automated online process and is only likely to take 14 days.

Notwithstanding the difference in timescale to achieve the same ends, this distinction has drawn the ire of AMI due to the fact that spent convictions – which have been served and a period of time has passed – will need to be declared by sole traders/single directors. 

It would seem there are worries that this spent conviction information, which does not need to be declared by anyone else when applying for jobs, will need to be declared to the FSA. 

There are worries that this information could be used to stop advisers becoming approved persons and AMI are already talking of ‘human rights’ challenges when the regime is brought in next year and the application process becomes compulsory.

For those who are already approved for a controlled function, the electronic notification form to the FSA is all that will be required, while those who already hold CF10 will not be required to take any action

Like most things in life, the approved person process could be more complicated than first thought and therefore it would be wise to use November as a month to start looking into what is required and how this impacts on you individually and the wider firm. 

We, at Paradigm, are certainly looking to help our members with this process and have already done so with the provision of information on this very issue in the latest issue of our newsletter, Target, plus we have dedicated MMR road shows taking place. 

One suspects there will be much debate on this and the wider repercussions of the MMR during the month ahead at events such as Expo and we would certainly urge all advisers to make the most of the expertise and knowledge on offer at such get-togethers to ensure they are clued up on what is coming their way.