FSA U-Turn on Mortgage Review

by Mark Johnston

The FSA was due to publish their report on controversial reforms on the 23rd of July but they have decided to delay the publication due to wide spread criticism and attaches from consumer groups and mortgage companies alike.  The Financial Services Authority has admitted that their attempts to protect borrowers from risks is actually likely to restrict lending and seriously damage the UK economy.
The FSA did decide to publish the Mortgage Market Review feedback statement following its Mortgage Market Review discussion paper published in which they “received a wide range of constructive and positive responses from firms, consumers and their representative bodies, and other stakeholders and is continuing ongoing detailed discussions with a number of these stakeholders.” according to the FSA website.
The FSA chairman, Lord Turner mentioned at the recent annual meeting with the watchdog that the Mortgage Market Review report would be delayed until early autumn.  Lord Turner went on to say “The more that a regulator seeks to intervene in defence of consumer interest, the more that the regulator is then making crucial trade-off choices on behalf of society, and such trade-offs are never purely technical, but judgemental and political with a small ‘p’.”
The review produced by the FSA, in line with their general responsibility, was due to ensure that the great British public aren’t subject to repeat bad practices and saddled with mortgages that they might not be able to afford or pay back.
Industry insiders and the Council of Mortgage Lenders have said that the report would have probably banned about 4 million existing mortgages, of which over 95 per cent were being repaid successfully.  Calling into question the validity of the report and the potential impact it will have once released.
This sentiment was echoed by Lord Turner who said that more work would be needed when deciding whether to protect 15 per cent of borrowers from potentially harmful investments at the expense of the 85 per cent who can afford their investment choices.
“That is a question which deserves wide-ranging debate, as best possible to forge a social consensus.
“It is not a question which a regulator can resolve on the basis of technical analysis alone.
“The analysis required to enable an informed debate on this issue needs to be of the highest quality and clearly presented,”
Director general of the Council of Mortgage Lenders (CML), Michael Coogan, has commented that he isn’t surprised that the FSA has been forced to delay the release of their review.  He said “We are pleased that the FSA wants to take time to get it right. The regulator has already indicated that it will be cautious about implementing change while the mortgage market recovers.
“The current muted state of the market presents no regulatory threat, so there is no need to rush.”
The FSA report into the Royal Bank of Scotland, according to Lord Turner, would pull no punches and would be clear on what caused the near collapse and why the watchdog performed such a poor service in regulating this organisation.  In fact, Lord Turner has described the watchdogs behaviour as “woefully deficient”.

FSA U-TurnThe FSA was due to publish their report on controversial reforms on the 23rd of July but they have decided to delay the publication due to wide spread criticism and attaches from consumer groups and mortgage companies alike.  The Financial Services Authority has admitted that their attempts to protect borrowers from risks is actually likely to restrict lending and seriously damage the UK economy.The FSA did decide to publish the Mortgage Market Review feedback statement following its Mortgage Market Review discussion paper published in which they “received a wide range of constructive and positive responses from firms, consumers and their representative bodies, and other stakeholders and is continuing ongoing detailed discussions with a number of these stakeholders.” according to the FSA website. The FSA chairman, Lord Turner mentioned at the recent annual meeting with the watchdog that the Mortgage Market Review report would be delayed until early autumn.  Lord Turner went on to say “The more that a regulator seeks to intervene in defence of consumer interest, the more that the regulator is then making crucial trade-off choices on behalf of society, and such trade-offs are never purely technical, but judgemental and political with a small ‘p’.”The review produced by the FSA, in line with their general responsibility, was due to ensure that the great British public aren’t subject to repeat bad practices and saddled with mortgages that they might not be able to afford or pay back.  Industry insiders and the Council of Mortgage Lenders have said that the report would have probably banned about 4 million existing mortgages, of which over 95 per cent were being repaid successfully.  Calling into question the validity of the report and the potential impact it will have once released.This sentiment was echoed by Lord Turner who said that more work would be needed when deciding whether to protect 15 per cent of borrowers from potentially harmful investments at the expense of the 85 per cent who can afford their investment choices.  “That is a question which deserves wide-ranging debate, as best possible to forge a social consensus. “It is not a question which a regulator can resolve on the basis of technical analysis alone. “The analysis required to enable an informed debate on this issue needs to be of the highest quality and clearly presented,” Director general of the Council of Mortgage Lenders (CML), Michael Coogan, has commented that he isn’t surprised that the FSA has been forced to delay the release of their review.  He said “We are pleased that the FSA wants to take time to get it right. The regulator has already indicated that it will be cautious about implementing change while the mortgage market recovers. “The current muted state of the market presents no regulatory threat, so there is no need to rush.”The FSA report into the Royal Bank of Scotland, according to Lord Turner, would pull no punches and would be clear on what caused the near collapse and why the watchdog performed such a poor service in regulating this organisation.  In fact, Lord Turner has described the watchdogs behaviour as “woefully deficient”.



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