Preying on the weak

As a new reader of Mortgage Introducer, I have not yet read Dan Raywood's articles or Mr Anonymous’ letter regarding estate agents, but nevertheless felt I had to write in response to Mark Graves’ letter (MI, 28 April), as his views seem to be somewhat misguided, if not naive.

Having worked within the financial services industry for over 30 years – the majority of which have been specialising in the mortgage market – I feel I am more experienced than most to comment on estate agents’ underhanded practice. While I could not agree more that it is always in the client’s best interests to obtain as competitive a scheme as possible, nevertheless it is common practice for estate agents to put extreme pressure on customers to speak to their own advisers, who are quite often tied to particular networks or mortgage clubs and may only be able to give limited advice.

Estate agents in particular prey on younger inexperienced potential purchasers, who are led to believe that if they do not see their in-house advisers to determine if they ‘qualify’ for a mortgage, there is no point in them viewing any properties. Recent incidents include estate agents who refused to put an offer to the seller unless the buyer saw their mortgage adviser and another where the estate agent refused to sell the property to the buyer unless he arranged the mortgage through the estate agency – which, incidentally, they did, converting an agreement-in-principle we had already obtained from the lender. These are not isolated incidents and are just a reflection of the ‘shark’ tactics estate agents employ.

We all have to accept the type of malpractice estate agents continually resort to, but at least if there was a regulatory body there may be some level of redress for all concerned and it might begin to give the estate agency industry some level of credibility and respectability.

Yours faithfully

Chris Poole

Poole Associates

Making the issue clear

Dear editor,

I am writing in response to the recent letters from brokers (MI, 5 May – ‘Taken out of the equation’ and MI, 12 May – ‘Raising eyebrows’) reporting poor practice in the sales of self-certification mortgages. I am sure many of your readers were as concerned as we were at the Financial Services Authority (FSA), to read comments like, ‘we all know that there occasionally needs to be a bit of ‘creativity’ to get the client over the line’.

The FSA has issued guidance in this area. It is important not to overstate your customer’s income as this is potential fraud. One of the key requirements to determine suitability of a product is for the adviser to have reasonable grounds to conclude that a customer can afford to enter into the regulated mortgage contract. This requires the adviser to consider the customer’s income and expenditure. Our guidance states that advisers can generally rely on information the customer provides unless they have reason to doubt it taking a common sense view. We know some advisers incorporate ways of checking the plausibility of a customer’s stated income into their procedures, such as checking bank statements or old payslips. We are currently undertaking some further thematic work looking at the sales of self-certification mortgages and will be publishing our findings later in the year.

In the meantime, I would urge the author of the original letter of 5 May, and any readers who find similar types of poor practice, to contact the FSA whistle blowing hotline on 0207 066 9200 to report a breach or call the FSA Firm Contact Centre on 0845 606 9966 to discuss the matter further.

I believe this information will make clear the issue for your readers.

Yours faithfully

Mandy Spink

Head of mortgages and credit unions, s

mall firms division

FSA

A multi-brand approach to the market

Dear editor,

Vic Jannels’ letter in MI (5 May 2007) asked why Lehman Brothers planned to launch a new direct-to-broker brand alongside our existing three first charge UK mortgage brands LMC, Preferred and SPML.

Launching a new broker brand allows us to dedicate our three existing brands to the packager market to meet our packager clients’ changing needs. All three brands have been built successfully around packager-focused services and we do not want to alter their focus by trying in the future to combine this with a scale direct-to-broker proposition. This decision was made after taking feedback from packagers and brokers.

Our aim is for those brands to continue to offer the best products and services to support packagers, with each brand covering a clearly defined product and service proposition. These will all be based on a state of the art IT platform, which will streamline our service to ensure that we offer focused, economic and leading edge services.

However, it is clear to the market that some brokers prefer not to do business through packagers, for whatever reason, and it makes competitive sense for us to diversify our distribution. By doing so through a separate brand, we will be able to offer a multi-brand proposition attuned to the different market needs of each key channel. As we are already set up to run multiple brands this is also a relatively simple and cost-effective solution for us too.

Yours faithfully,

Simon Hinshelwood

Chief executive officer

Managing Director

Lehman Brothers Mortgage Capital businesses

Clear, fair and not misleading?

Dear editor,

In the FSA’s statement of 26 January on mortgage exit administration fees (MEAFs), mention was made, quite rightly, of principle six in ‘Treating Customers Fairly (TCF)’.

However, there was no mention of principle seven – ‘communication with clients’, which relates to due regard to the information needs of clients and communicating information which is ‘clear, fair and not misleading’.

In the mortgage lenders’ Key Facts Illustrations (KFIs), lenders would normally put their MEAFs in section eight. However, some lenders have another tucked in with a lot of other wording and details regarding early repayment charges under section 10.

This is where principle seven comes in, as I would argue that having more than one fee for the same job and hiding part of it away in another section does not conform with the spirit of being ‘clear, fair and not

misleading’ and certainly is not in the spirit of TCF.

For example, if you took Bank of Scotland, it will show £50 deeds dispatch under section eight and £195 under section 10 tucked away as repayment administration fee making £245 in total. Similarly, some lenders have the whole MEAF situation in section 10, such as Nationwide and Coventry. These variations are commonplace throughout the market and are not directed particularly at the above lenders.

Abbey, for example, is doing a sneakier thing by changing the terminology under section eight of the KFI calling its fee ‘a mortgage administration fee (current fee) for providing, maintaining and closing your mortgage is payable at the end of your mortgage. The amount we charge you will not exceed this amount plus the annual increase of Retail Price Index calculated to the end of your mortgage’.

Therefore what is the FSA going to do about ensuring lenders give one fee to cover MEAFs and not a number of them, and it be ‘clear, fair and not misleading’ information to the potential clients in the lender’s KFI?

Danny Lovey

The Mortgage Practitioner