AMI has submitted its response to the interim report which set out the FCA findings and the way they would like to see the market develop.  AMI has been involved in numerous meetings, discussions and debate with the market study team, our fellow trade bodies and a wide range of market participants.

Robert Sinclair, Chief Executive of AMI said:

“Our main concern with this report has been the focus on price without any validation of the quality of the advice or whether the “cheaper lenders” have the capacity to handle the business assessed.  AMI were strong supporters of the move under MMR to a wider definition of suitability and remain concerned that this report ignores these fundamental market improvements.

We are keen to support a tool that allows consumers to access a database of brokers and see what services are provided in a useful way.  The Money Advice Service Retirement Adviser Directory already provides this for pensions advice and it was originally intended to extend this directory to include mortgage advisers.  In addition, the FCA is consulting on its own Directory of Advisers.  We will liaise with the FCA and the Money Advice Service to consider if these or other approaches would provide the most effective solution. We are however struggling to identify “quality measures” which would fairly differentiate between advisers.

On the work to improve eligibility criteria we are firmly of the view that initiatives in the last 12 to 18 months have moved this agenda forward significantly.  Intervention now may limit or slow innovation, therefore we are keen to avoid making changes of the type suggested.

We are aware that our fellow lender trade bodies are working with their members on improving the situation of mortgage prisoners and hope that the plans deliver an overall improved position.

We will continue to work with the FCA over the coming months to ensure that any proposals meet the needs of consumers and work effectively for all market participants.”

Our response is attached.

AMI recently surveyed its membership to ascertain how intermediaries are using the “free legals” services offered by many lenders.

In response to a series of questions brokers told us that 73% only recommend free legals on remortgage; 19% on both purchase and remortgage; and 8% do not recommend free legal based products.

82% of brokers told us that the service delivered by “free legal firms” is worse or significantly worse (52%) in comparison to a customer’s own choice of solicitor/conveyancer.

57% preferred a cash-back option (26% preferred products with free legals).

71% of those responding indicated that they were experiencing delays and issues with those providing free legal services.

75% of intermediaries thought that lenders or builders should not offer “free legals” as this is too great a conflict of interest.

Respondents commented “the standard of service is generally poor”.  “Lenders are aware the service is abysmal but they still continue using these firms and that is reprehensible”.  “Not able to get through by phone, missing completion dates – terrible”.  “Firms don’t have one legal adviser dealing with a case, it’s whoever picks up the phone…post is regularly lost… I have to warn the client the process will be bumpy”.  “I prefer cashback products then I can choose which remo solicitor we use.”  “Certainly on a purchase a client should choose their own legal representation.”

Robert Sinclair, Chief Executive of AMI said:

“This survey raises a number of questions on the effectiveness of the free legal services offered to many consumers.  It is clear that the significant majority of brokers would prefer a cashback option where lenders feel that they wish to incentivise aspects of their products.

AMI thinks that all lenders should reconsider their offering of free legals particularly addressing the potential issues of conflict of interest and the quality of service being provided by the firms with whom they have partnered.

AMI will be talking to their lender trade body contacts about these findings.”

AMI welcomes the FCA’s view that the mortgage market is generally working well, that most consumers are switching and that the value of intermediaries is recognised.  We are also pleased that the FCA found little evidence of commercial arrangements causing material harm for consumers and no existence of commission bias, which is consistent with its previous findings four years ago.

Robert Sinclair, Chief Executive of AMI said:

“We are pleased to see agreement that the issue of mortgage prisoners, whilst smaller than anticipated, is now acknowledged as significant.  This needs to be tackled and we would like to see lenders taking a more pro-active approach.  In addition, the report provides evidence of the scale of product transfers business which remains unreported.  As it now clearly comprises more than a third of the market, we think that UKFinance and the FCA need to gather and publish this data to reflect its significance.

We are happy to work with lenders to help them meet the existing rules on lenders openly publishing criteria to assist in the Decision in Principle process.  We are however concerned about the view that the advice and suitability rules are hindering consumer choice.  Any dilution of the rules to facilitate online solutions will need careful assessment as the Mortgage Market Review rightly recognised the need to establish, through advice, the suitability of a mortgage for a customer.  The FCA has always stressed that suitability is not price-driven so this is a significant attitude shift.  Anything which will dilute the opportunity for consumers to benefit from advice runs the risk of moving the industry and consumer protections significantly backwards.

We are keen to support a tool that allows consumers to compare the service provided by brokers.  The Money Advice Service already provides this for pensions advice and it was originally intended to extend this directory to include mortgage advisers.  We will work with the FCA and the Money Advice Service to consider if this or other approaches would provide the most effective solution.”

AMI is delighted that the FCA has listened and agreed with our arguments for a fairer arrangement for mortgage brokers.  From April 2019 mortgage brokers will no longer have to pay for the mis-selling of personal pensions and investment business.  Instead pure protection will form part of the general insurance distribution class.  In addition, all intermediary classes will now benefit from a 25% contribution to costs.

This has been a two year journey to achieve a fairer outcome for all mortgage brokers and it will have a significant impact on the fees levied from 2019.

Robert Sinclair, Chief Executive of AMI said:

“The senior management of the FCA listened to our logical arguments and agreed that these changes were sensible.  We believe that these amendments to the funding of the FSCS should deliver a more balanced industry in the future.  In resisting strong lobbying from the provider community, the FCA has stood up in support of smaller advice firms.”

It is with great regret that AMI has accepted the resignation of its Chairman Pat Bunton as he has stepped down from his role at London & Country mortgages.

This will put in train a process for the Board to elect a new Chairman from within in accordance with the membership rules.  London & Country will nominate a replacement to the Board in due course.

The day-to-day work of AMI will continue through its employed executive team.

Robert Sinclair, Chief Executive of AMI, commented:

“I have had the distinct pleasure of working alongside Pat as AMI Chairman for just over five years, in addition to the period before that when he was a fundamental part of the team that extricated AMI from AIFA.

Pat has been a passionate advocate of consumer-focused advice and the role that advisers play in delivering great results to the UK population.  He has given his time and considerable expertise and knowledge for no reward other than knowing he was doing the right thing.  The intermediary sector owes him a great debt for the work he has done on MMR, mortgage prisoners, the ongoing competition review, revision to the Compensation Scheme and a regulator that listens to the mortgage advice community.

In addition he has delivered a financially robust independent trade body which is respected at the highest levels within the regulatory community.  His input will be missed by the team, the Board, the FCA, Bank of England and Treasury.  These will be big shoes to fill.

I would also like to thank the team at L&C who gave us Pat and his contribution without ever counting the many hours we took up.”

The FCA has today issued a further consultation on reviewing the funding of the Financial Services Compensation Scheme (FSCS).  This follows on from its consultation paper issued December 2016 and a series of roundtable discussions and meetings which AMI has been involved in over the last year.

Over the last two years AMI has argued for much needed reform, which we set out in our response in March, with the right solution involving a restructure of the FSCS classes to ensure greater affinity across the product classes.  With the majority of claims in the life and pensions intermediation class relating to mis-sold SIPPs, it is grossly unfair that mortgage firms as the primary writers of life insurance have been paying a disproportionate amount of investment advisers’ invoices despite no connection between the two business lines.  We are pleased to see that the proposals have been revised so that the FCA is now consulting on moving pure protection intermediation from the Life and Pensions funding class to the General Insurance Distribution class.

AMI has also strongly supported the inclusion of provider contributions to the intermediary classes, which we believe mistakenly disappeared from the FSCS structure at the time the FSA split in 2013. Its reintroduction will only accurately reflect the existing regulatory landscape and will hopefully focus all minds more clearly on their respective responsibilities and accountability.

AMI will be responding to the consultation before its closes on 30 January.

Robert Sinclair, Chief Executive of AMI said

“We have been tirelessly lobbying several issues with the FSCS structure and we are pleased that the significant work we have carried out with the FCA over the last year is materialising.  To see revised proposals include the removal of protection from the pensions class is positive as this will greatly impact mortgage intermediaries’ bills.  The fact that the FCA has decided to re-consult with industry rather than proceeding with one of the proposals set out in the last paper is encouraging.  They have not only listened to our concerns but are openly engaging with industry to ensure that they implement the fairest solution.

We are pleased that the FCA has recognised that providers are also responsible for the distribution of their products.  Whilst the proposed provider contribution of 25% is not as high as we had hoped for, it’s a step in the right direction.

We are really happy that the work done since the first consultation has paid off with a further consultation which reflects our long-term lobbying position.”

AMI has announced details of its Board elections which will take place in November. As part of being an open and transparent body, which is fully representative of its members and their interests, the period for nominations for certain Board positions has now been opened. These are part of the process where all Board positions are re-elected on at least a three-year rolling cycle, although existing members of the Board may stand for re-election. This year’s Board elections will take place in the Regional and National firm constituencies, the Network constituency and the Club constituency.

Any AMI member firm who falls under one of these constituencies can nominate a member of their senior management team to stand for election. To stand individuals must complete a nomination form and be nominated by an AMI member from within the same constituency. Nomination forms must be returned to AMI by 1 November.

Should more than one AMI member want to stand for the Board, a contested election will take place. Those individuals standing will be required to submit a biography and an election manifesto to those constituents eligible to vote. Ballot papers for a contested election will be sent out by 13 November.

The results will be announced on 30 November.

Robert Sinclair, Chief Executive of AMI, commented:

“The AMI Board plays a vital role for the organisation in providing direction and policy guidance to AMI’s activities. Members wishing to serve as AMI Board members must be committed advocates of the intermediary distribution channel and prepared to represent not just their own constituents but the entire mortgage intermediary profession. We hope AMI members will want to contribute to the trade body’s work and shape our ongoing agenda by standing for election.”

AMI members who wish to stand for election to the Board and are in any of the above constituencies can request a nomination form by e-mailing info@a-m-i.org.uk. Regional firms are classed as having between 6 and 100 advisers; national firms with over 100 advisers.

Recent global attacks, a regulatory focus on cyber risk and General Data Protection Regulation mean now is as important a time as ever for firms to review their cyber security strategy.

AMI has created a factsheet for members which sets out the key areas for firms to consider and potential solutions. We suggest that even firms who have developed solutions in this area check their plans against the sources in our factsheet. Firms should approach cyber risk in a similar way to regulatory risk, in that staff at all levels should have a basic understanding. Cyber risks should also be addressed in firms’ overall disaster recovery plans, which should map the steps that need to be taken in the event of an attack or breach and allocate responsibilities. How a breach is communicated to staff, to the data subjects who might be compromised, and how to deal with regulators and the press should also be covered.

Robert Sinclair, Chief Executive of AMI said:

“The global spread of the WannaCry ransomware should be a wake-up call for businesses to review their cyber security infrastructure, as no sector or type of firm is immune from attacks. This is particularly relevant considering the implementation of the General Data Protection Regulation next May which requires firms to understand how they hold and process their data, with significant fines for any breaches.

Our factsheet should be considered a starting point for members, as the National Cyber Security Centre produces extensive guidance for firms on specific areas. We are including a regular section on cyber security in our monthly member newsletter in which we will feature a different topic and signpost to relevant guidance.”

AMI has now completed its election process and the results are:-

• The Regional Constituency (1 vacancy) – Ray Boulger (John Charcol) is re-elected.
• The National Constituency (1 vacancy) – Dean Mirfin (Key Retirement Solutions) is re-elected.
• The Practitioner Constituency (3 vacancies) – Andrew Montlake (Coreco) and John Whyte (The Right Equity Release) are re-elected and Scott Taylor-Barr (Carl Summers Financial Services) is elected.
• The Mortgage Club Constituency – Stephen Smith (Legal and General) is elected.
• Network Constituency (2 vacancies) Mark Graves (Sesame) and Peter Curran (Countrywide/Mortgage Next/Mortgage Intelligence) are elected.

Robert Sinclair, Chief Executive of AMI said:

“This process ensures that the membership affirms that it is being properly represented. I would like to thank all those who stand for election which ensures a democratic process. I would also like to express my sincere thanks to Steve Smith of Springtide who is standing down from the Board after many years of service and support. I know this was difficult decision and would like to express my sincere thanks for his contributions over the years and hope that he may return at some time in the future.”

AMI is pleased that the study appears to have more specifically focussed its attention since the feedback statement in May 2016. AMI was and remains strongly supportive of the move to deliver more advised sales as set out in the MMR. This allows the market to be complex and innovative whilst giving the consumer the safety net of professional advice and full regulatory protection. AMI remains wary of those who argue that the regulatory demands stifle innovation, whereas we see them as necessary to ensure the best consumer outcomes.

Robert Sinclair, Chief Executive of AMI said

“We remain very supportive of this review to ensure that the market allows the right product to get to the right customer and ensuring there are not commercial conflicts which are detrimental to consumers. We strongly support the restriction to the first charge residential market and the inclusion in scope of internal product switching. We are hopeful that this review will size and assess the extent of execution only in product switching and whether this might harm consumers in a rising rate environment.

The decision to look at how consumers access information through best buy tables and price comparison websites (PCWs) as well as directly via lender and broker websites and apps is well founded. In addition ensuring there are no soft inducements in the areas of PCWs and even in sourcing systems will ensure that the market is robust.

AMI will support the work on panels and the impact of restrictions, particularly where it is a panel of one. Whilst we do not feel that the current procuration fee payments influence broker advice due to the relatively small differentiations between lenders, it is positive that this will be reviewed. However it is hoped that the team will look at this as having elements of costs substitution in the chain and is not a pure added cost.

We will be working closely with member firms and the FCA throughout the review period.”

The Association of Mortgage Intermediaries has undertaken a further Board review to improve its ability to represent the membership, and is able to lobby in the most effective way.  To deliver this we are making a number of changes to the Board and its components.

We are introducing a new membership class for Mortgage Clubs which will be represented on the Board.  Elections for this position will be held shortly.

Shortly after AMI was established as a distinct legal entity it appointed Patrick Bunton as Chairman in January 2013.  This was for an initial term of 2 years, which was renewed by the Board in December 2014.  The Board have asked Patrick if he will retain this position for a further 12 months.  Patrick has kindly agreed to continue as Chairman.

At the same time Stephen Smith of Legal & General has asked to step down from the position of Deputy Chairman.  The Board extends its deepest appreciation for the long service and support given by Stephen over the years.  He has been on the board of AMI since its inception over 12 years ago and has held the position of Deputy almost as long.  We are grateful for all his hard work in promoting and supporting the Association and for standing for election in the above mentioned Mortgage Club constituency.

The Board have decided that we should elect 2 new Deputy Chairmen, and the Board have agreed to appoint David Copland and Martin Reynolds.

Finally our President, The Rt. Hon the Lord Deben, has decided that this is an appropriate time to step down from the AMI Board.  The Board wishes to thank Lord Deben for his vision and support firstly as Chairman and then as President.  He has provided strong and effective leadership and guidance which has greatly assisted the growth and success of AMI.

Robert Sinclair, Chief Executive of AMI said:

“These changes equip AMI for the challenges that lie ahead in dealing with the Mortgage Competition Review, FSCS funding changes and the advent of the Senior Managers Regime.  The Association is committed to working with firms to act in their best interests.”

AMI has announced details of its Board elections which will take place in November. As part of being an open and transparent body, which is fully representative of its members and their interests, the period for nominations for certain Board positions has now been opened.  These are part of the process where all Board positions are re-elected on at least a three year rolling cycle, although existing members of the Board may stand for re-election.  This year’s Board elections will take place in the Regional and National firm constituencies, the Network constituency and three of the Practitioner constituencies.  There will also be a vacancy in a new constituency for Clubs.

Any AMI member firm who falls under one of these constituencies can nominate a member of their senior management team to stand for election.  To stand individuals must complete a nomination form and be nominated by an AMI member from within the same constituency.  Nomination forms must be returned to AMI by 18 November.

Should more than one AMI member want to stand for the Board, a contested election will take place.  Those individuals standing will be required to submit a biography and an election manifesto to those constituents eligible to vote.  Ballot papers for a contested election will be sent out by 25 November.

The results will be announced on 12 December.

Robert Sinclair, Chief Executive of AMI, commented:

“The AMI Board plays a vital role for the organisation in providing direction and policy guidance to AMI’s activities. Members wishing to serve as AMI Board members must be committed advocates of the intermediary distribution channel and prepared to represent not just their own constituents but the entire mortgage intermediary profession.  We hope AMI members will want to contribute to the trade body’s work and shape our ongoing agenda by standing for election.”

AMI members who wish to stand for election to the Board and are in either of the above constituencies can request a nomination form by e-mailing info@a-m-i.org.uk.  Regional firms are classed as having between 6 and 100 advisers; national firms with over 100 advisers and practitioners must be members who spend at least 70% of their working week advising customers on mortgages and related needs.

AMI in conjunction with NMG Consulting has asked brokers about the extent of the mortgage prisoner issue. The FCA indicated in its May 2016 post MMR Responsible Lending Thematic Review that from its work with lenders, that there was no obvious issue.

However the research undertaken by AMI and NMG in July indicates that 86% of brokers believe there is still a mortgage prisoner issue. Of those, a quarter felt that the problem was getting worse, but the remainder felt that whilst there was an issue circumstances were improving.

In order to scale the problem, 76% of brokers have less than 10% of their clients who are prisoners, whilst 18% estimate that between ten and twenty per cent of their clients are mortgage prisoners. 6% of brokers have more than 20% of their clients who cannot get a new deal.

Robert Sinclair, Chief Executive of AMI said

“Despite the assurances from lenders, lender trade bodies and our regulator, we continue to hear evidence for our firms of a continuing problem. Whilst interest rates remain low, the issue is unlikely to surface significantly. However as soon as rates rise we have no doubt that what is a trickling stream will become a flood and the industry will have to address matters.

This covers a range of issues including weak loan to value, prior self certification, interest only, self employed and those with credit blips but a good mortgage payment record. We hope that the supervision teams at FCA begin to take this seriously and look properly at the extent of this issue and whether all lenders are acting in the best interest of all their mortgage customers.”

In responding to this year’s FCA fees consultation, AMI made a series of objections to the proposals. These included:

• the overall rise in costs
• the increases in the fees for mortgage and protection firms
• the addition of consumer buy to let (CBTL) fees which most firms already include in their declared income.

As one of only two organisations to object to the additional CBTL fees, AMI is pleased that the FCA has agreed to remove the CBTL periodic fee and CBTL FOS levy for already authorised firms.  This means that our members will not have to pay an extra cost for an activity they are already carrying out.

The FCA is however intending to increase its periodic fees for mortgage intermediaries as planned.  Despite AMI highlighting the number of FCA staff that should be working on mortgages based on the amount the industry pays, the FCA has again provided no clarification of its costs.  It has simply attributed the increase to implementing the Mortgage Credit Directive.

Robert Sinclair, Chief Executive of AMI said

“We are grateful that the FCA has acknowledged some of the issues AMI raised around the minimum fee.  The FCA has gone some way to reducing the burden on small mortgage brokers by removing the additional CBTL fees.  However the continued inclusion of the consumer credit fee is not insignificant.  AMI fundamentally believes that consumer credit activities should not require mortgage intermediaries to hold a separate permission as they are already accountable under both the broader FCA principles and specific conduct rules.

Although the majority of intermediaries will pay the minimum fee, there will be a significant bill for the largest firms who will bear all of the £1.2 million increase.  We are disappointed that the FCA has failed to give a full justification for the amount being levied on the sector.”

Under the cover of BREXIT on Friday 24 June, the FCA issued a handbook notice which advised that they have implemented the new fees rates without providing their usual feedback and policy statement.  In addition this was not advised to stakeholders or overtly published on their website.

This means that firms may be able to now see their actual fees through the calculator, but as we have not been advised – we do not know.  What is certain is that invoices will now start landing on doormats.   We are promised the feedback statement in due course, but when remains a mystery.  We cannot tell if any account has been taken of our submissions.

Robert Sinclair, Chief Executive of AMI said

“The FCA appears to care little for the organisations’ that fund it.  It is no longer able to meet the simple repetitious timetable of fees consultations, as they appear too excited looking for competition issues in markets where little concerns exist.

To slip this out on a busy news day smacks of all that is wrong with a too big to care regulator.  The sooner Andrew Bailey arrives and gets a grip of the organisation the better.”

AMI has to express its disappointment that after the five year Mortgage Market Review and the two years it has taken to implement the Mortgage Credit Directive, the sector is not to be left alone. Some might applaud the FCA decision to challenge the results of its own MMR, but AMI is concerned that this will only introduce uncertainty into what is still a fragile market. We are struggling to see the need for even a targeted market study, as the bulk of the issues could be addressed by thematic work and supervisory action.

Robert Sinclair, Chief Executive of AMI said

“Following the publication of final MMR rules, when certainty returned to the market, lending has gradually expanded and both consumers and lenders have chosen to do this through the intermediary channel. It is concerning to see lenders continuing to challenge the results of the MMR now through this route, as whilst it has made the process more onerous for some consumers, more now receive good advice with the full protections that this affords. AMI is concerned that the paper does not recognise the difference between a broker who works in the best interests of the customer rather than the lender who is out to shift product.

We are concerned that there is no respondents list so we can see who has contributed to this debate. However it is great news that the FCA has found that the mortgage market is now lending responsibly and that there are no issues with mortgage prisoners. This appears at odds with broker experience and that of the renowned consumer champion Martin Lewis, so no doubt the Chancellor will be assured by the FCA there will be no issues when interest rates rise. AMI considers that there remain underserved groups of borrowers in the areas of, interest only, lending into retirement, self employed, contract workers, foreign currency earners and ex-pats that still need attention if the market is to serve the whole.

AMI will of course work with the FCA to ensure that consumers can have access to effective online tools to educate and enhance their access to the widest market. We will also contribute fully to ensuring that the debate on best lender and best product for each consumer is fully informed. Whilst we have no issue with lenders selling their own products, this cannot be advice in the full sense of the word, as any solution will be from a restricted product set. The Directive set out clear rules around panels and sets out that there must be full disclosure; the fact that a lender is, after all, a one firm panel appears lost in this paper.

We will work to ensure that any conflicts of interest in commercial arrangements are suitably managed and controlled. We are surprised to see this as an issue as we had assumed that firms that had any such concerns would have dealt with them before now. AMI does not see issues arising from the traditional procuration fee arrangement that was accepted as presenting no issues under MMR and is also enshrined within the European Mortgage Directive.”

The FCA have today released their new business plan and budget including draft fees for the year 2016/17.  The FCA have set out that that they are holding their existing costs “flat”, but mortgage brokers and lenders will see their funding requirement rise as the second charge regime is integrated into the existing regime.

Most categories will see a 1.6% fall in costs, but mortgages have an increased funding requirement of 8.7% leading to a net increase of 7.1%.  This may not be quite as bad as it seems as the FCA is estimating a 10% increase in firms’ declared income so the amount a firm will pay will fall by 2.3% on a like-for-like basis.  The mortgage industry does however keep paying for its success.

This however masks the fact that £3.1m has been added to the costs of mortgage lenders and brokers to supervise the second charge regime.  The total bill for lenders and brokers now stands at £36.8m and AMI still awaits a proper explanation on what is costing this much.

Robert Sinclair, Chief Executive of AMI said

“When the £200 annual fee for holding the Consumer Buy-to-Let permission is added plus the hidden FOS levy, together with £300 minimum annual fee for Consumer Credit – this makes the new bill for the smallest firms look increasingly expensive.  What was £1,000 only two years ago can now be a staggering £1,619 for the same business.

AMI will:

• continue to challenge these unfair fee increases on behalf of member firms
• ask for explanations as to what this money is being spent on
• be responding vigorously to this alleged consultation
• campaign for amendment to the unfair FSCS funding arrangements that are not included in this consultation.

The mortgage industry has been hit with significant increases over previous years to pay for MMR and the implementation of MCD.  Now that these are complete there is no respite as firms continue to be dogged with higher fees.  The Business Plan makes no special play on mortgages but the costs continue to grow.  No dividend for the investment in new regulation and no explanation on how the 8% increase was calculated or justified to the FCA Board.”