Over the last ten years, the mortgage market in the UK has changed significantly. Alongside increased regulation of the industry, stricter lending rules have been introduced and the sector has had to manage increased adoption of technology.
One of the main consequences of these changes to the market is an increased focus on compliance for both mortgage advisers and lenders. What’s more, it’s not unlikely that there will be further compliance obligations for mortgage professionals over the coming years.
With compliance becoming a key consideration for mortgage brokers in recent times, here are five top tips covering some of the market’s most significant requirements.
Take GDPR seriously
Coming into force in May 2018, the General Data Protection Regulation (GDPR) replaced the Data Protection Act 1998 and is something all businesses have to comply with.
It has overhauled the way businesses deal with consumer information and data, introducing hefty fines from the Information Commissioner’s Office (ICO) for those that breach the rules.
For mortgage brokers, the first thing you should do is become familiar with GDPR and its key principles – many businesses will have nominated someone to oversee their GDPR strategy.
Although the vast majority of industry firms will have had a GDPR strategy for some time now, it’s important to keep reviewing processes to make sure you are fully compliant.
Four of the major subjects to consider are consent requirements, data breach recording, consumers rights and Fair Processing Notices. For brokers, filing systems – both physical and digital – will also be a top priority.
Making sure you understand the rules on data deletion, storage, transfer, retention and collection is key to compliance with GDPR. You can see a full ICO guide here and it is recommended that you seek out a specialist firm if you need further advice on any aspect of GDPR.
Don’t forget MMR
It may have come into force over six years ago now, but the Mortgage Market Review (MMR) still has a huge impact on the way the industry operates today.
Self-certification mortgages were banned, fewer interest-only mortgages have been available and affordability checks have become much stricter.
This legislation, introduced by the Financial Conduct Authority (FCA), was devised with the aim of reducing the kind of high-risk lending which contributed to the global financial crisis in the noughties.
For the majority of brokers, the rules introduced as part of the MMR will have become a normal part of the working process. However, it’s important to continue to practice them effectively and consider how they impact the role of an adviser, from your relationship with lenders to working with consumers.
Meanwhile, for new brokers to the sector, researching the MMR and its impact on the industry should be one of your first tasks. You can read more about 2014’s significant overhaul of the mortgage market here.
Keep up to date with the FCA
For introducers, the FCA is one of the main bodies you need to monitor. It was responsible for the MMR and will oversee any future regulation of the industry.
During 2020, it has also provided advisers with guidance relating to the Covid-19 pandemic, including key information on Business Interruption Loan Schemes.
It also provides guidance on the Mortgage Credit Directive, how to treat customers fairly, contact terms and information on how to comply with rules on financial promotions and adverts. Advisers can also report mortgage fraud from competing firms or lenders via the FCA.
By signing up to receive FCA updates and keeping up to date with industry trade news, brokers can make sure they stay one step ahead of regulation and make sure they have plenty of time to make changes ahead of future changes.
Stay on top of PRA stress tests
The Prudential Regulation Authority (PRA)is the Bank of England’s regulatory arm which oversees measures such as affordability stress tests.
While it is a lender’s duty to enforce the relevant stress tests on borrowers, brokers pay an important role in ensuring prospective borrowers have all the information they need.
What’s more, brokers can help borrowers to understand what will be required of them from lenders and subsequently ensure that lenders are complying with the rules.
The rules on buy-to-let stress tests were made more stringent in 2017, so it’s key that brokers communicate the new system to investors who may not have sought funding for a long time.
You can find out more about the PRA and how it works here.
Transparency is key
An important part of complying with the various measures in place to protect consumers, as well as providing the best possible service, is being transparent with customers.
By informing clients exactly how the process works, what is expected of them and how you are going to operate, you can make sure everyone is on the same page.
Not only does this help to demonstrate your dedication to compliance to consumers, but it can also reduce the chances of misunderstandings or complaints being made further down the line.
The brokers and brokerage firms with a focus on transparency and providing a first-class service can increase their chances of positive reviews, referrals and ultimately new business.
