Overall, from an intermediary's perspective, the proposals can be viewed as broadly positive.

FSA has recognised the value of advice by requiring that where there is interaction (face-to-face or telephone) the mortgage must be advised. We fully support this move, however, if advice is to be the default for mortgage transactions then an execution-only opt-out must be available for those consumers who know the product they want and are aware of the protections they are giving up.

FSA has also proposed to allow high-net worth clients and mortgage professionals to be exempt from some rules, even if spoken interaction takes place. Ultimately it will be for lenders to decide how they apply these exemptions.

Regardless of the type of sale all mortgage sellers (intermediaries and direct sales staff) will be required to be qualified to the same level. AMI has campaigned for some time for a level playing field in this area of the mortgage market.

The consultation paper clarifies that lenders are ultimately responsible for the affordability assessment. We do not believe that this deviates from what was always FSA's intention in the original MCOB rules.

The absence of commission bias in the mortgage market means that brokers will no longer be required to offer a fee only payment option to describe themselves as 'independent'. Brokers will be required to let consumers know that direct deals exist but they will not be required to advise on them. If a broker does advise on a direct deal, they do not need to produce the KFI but they should make a record of the recommendation and provide a copy to the consumer.

FSA has greatly reduced the amount of paperwork a consumer will receive. The requirement to provide an IDD will be removed and the number of trigger points for issuing a KFI is reduced. FSA will not require suitability letters to be issued but brokers can still do so as a matter of good practice. For an interest-only mortgage to be sold a credible repayment strategy must be proposed. This will be for each lender to set as part of its lending policy.

FSA has proposed transitional arrangements to accommodate those consumers that could fall short of the new affordability requirements. The translational proposals are a step in the right direction but will require further development if they are to have a real impact.

Overall FSA's MMR paper is considered comprehensive, and is designed to give a clear direction of travel.

Whilst some areas give us concerns the paper on balance should be welcomed by the intermediary community.

Alex Revell
AMI Policy Analyst

Since the publication of European Mortgage Directive - 'Credit Agreements Related to Residential Property Directive' or CARRPD, we have seen a raft of work being produced from various European committees, the Polish European Presidency and the European Council itself.

Europe already has directives covering insurance, investments, collectives and unsecured lending, therefore it has long considered the mortgage sector as an area in need of its attention.

The scope of CARRPD is not entirely agreed. At a basic level the directive aims to address core conduct issues. However, since the first draft document was issued by the European Council we have seen a range of committees inputting into its development.

Clearly we would support a level playing field being applied in most instances. In particular, in relation to competency, disclosure and conduct requirements. Furthermore, any authorisation, supervision and registration requirement should not favour lenders over intermediaries.

There is concern that the introduction of European Standard Information Sheet (ESIS) will replace the KFI at great cost to UK industry but with little additional benefit for consumers. Indeed FSA's own studies have questioned the effectiveness of these types of disclosure documents.

Movements have been tabled to retain the KFI as the UK version of the ESIS. However, the MEPs will need to consider whether this should be permissible under the directive or whether a European wide document should be retained to meet the Commissions wider single market objectives.

The directive will be a mix of both minimum and maximum harmonisation requirements. Minimum harmonisation applies basic principles which the UK can then flesh out in its own regulation. However, maximum harmonisation will need to be applied straight from the directive, without deviation by the UK regulator. As such it is very important that maximum harmonisation is applied sparingly and with caution. There is growing support for this to be limited to all but a few areas. For example, the method of calculation used for the Annual Percentage Rate of Charge - the EU mortgage version of APR.

The directive aims to make it easier for businesses to undertake cross border trade. Whilst we may question how realistic this objective will be, given the difference between each states laws and practices, not to mention currencies, as intermediaries it is hard to argue against provisions that could allow UK intermediaries to take their recognised good practices into new markets.

The debate within the directive is who is responsible for firms that operate across Europe. Should it be their own home state or the host state in which they wish to do business. There are pros and cons to both arguments and the end result could see a mix where home states are responsible for some areas and host states for other. This could see firms operating under the host states conduct rules but still being authorised and registered within their home state.

We expect the vote on the directive by the parliament to be made in the first half of 2012. However, the MEPs involved within the committees are due to vote on their own position before this will happen. Also the European presidency will change from Poland to Denmark at the start of next year. It is expected that the Danes will want to introduce their own concerns into the directive, in particular by focusing on disclosure requirements. Therefore we may still have some way to go before we see clarity over what the directive will finally look like.

Alex Revell
AMI Policy Analyst

2011 has started with the expected conflicting messages.  

The level of intermediary business continues to be robust with the very limited numbers of first time buyers preferring the advised intermediary route.  

The first time buyer plight has caught the attention of the Housing Minister, but the summit he called merely brought a commitment of more talks.  

One can't help but wonder if the wrong people were in the room. It was those with great industry knowledge but no power to act.

If results are what is genuinely wanted then I feel a change of casting director may be required.

With inflation continuing to dog the economy, base rate remains as low as it can be.  The only way is up and two small moves this year look most likely. May and September are my preferred bets.

Shoe-in for the best supporting actor Oscar has to be Mervyn King as he steadfastly steers the ship through the inflationary waters not allowing such irritants to deflect from broader policy issues.

Stormy waters still at the FSA as its top brass continue to exit the building leaving that boat lacking in senior officers and with its credibility still holed below the waterline.  

This lack of experience is beginning to see too many disjointed and poorly executed initiatives landing on an industry still struggling to absorb the previous changes in approach.

I am minded of the team suffering 3 coaches in a season who cannot quite remember which pre-arranged play is still on the list or which type of pass is expected.

That the MMR does not look like being implemented in 2011 is no comfort to all of us still involved in debating the new rules.  

The lack of clarity as the compulsory entry of the best overseas film into the UK category through an EU mortgages directive, delivers a quandary.

We are having to fight on two fronts as the Brussels legions now descend on our market, so we must ensure that this does not deliver any surprising outcomes.

Finally, the proposal to move second charge loans to FSA and the MCOB rule book is liable to raise the bar on advice considerably.  

Proposals for the need to consider a further advance before a re-mortgage would be further clouded if seconds are brought into this landscape too.

By consolidating into one rule book it may be their demise rather than the growth route envisaged. So the best newcomer may face a premature end at the hands of their new director.  

But there is still time for discussion and compromise.  

Is there anyone on the bridge of the good ship FSA sufficiently senior who understands lending mixed with social policy issues capable to influence the production and win the day?

Robert Sinclair
Director, AMI