Is packaging first and second charge mortgages just the same?

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

How many times have we heard that in the past few weeks? And for me, there lies the issue.

Many mortgage advisers believe that second charge mortgages are similar products to first charge mortgages only for smaller amounts with higher interest rates and inflated packaging costs.

So I thought it might be worthwhile pointing out some of the differences between the two products and explaining why this comparison is not currently a fair one.

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More in and out than the hokey cokey

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

My phone rang at 5.00am a week last Friday with the first panic-stricken friend informing me that the Leave campaign had won the referendum and we would be leaving the EU. By the time I’d been to the gym and got into the office, I had around 20 missed calls, the pound had fallen through the floor, the stock market had crashed and the prime minister had resigned. In fact, one of David Cameron’s greatest achievements is probably putting in place a strategy for not serving Article 50 immediately, but giving his government and successor the opportunity to put together a coherent plan as to how we work through our divorce from EU membership.

The chancellor had stated before the referendum that to exit the EU would leave the UK with no economic plan (even though it’s his job to have one) and there would be an emergency budget to initiate increased austerity measures and increase taxes. It now seems that this will not be necessary and there will now be a reduction in corporation tax to 15% to show that the UK is ‘open for business’.

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Second charge mortgages: Leave it to the experts

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

In recent weeks there has been a great deal of focus on the second charge mortgage market with many new entrants, varying business models and plenty of opinions as to how the sector should operate following the implementation of the MCD.

Unfortunately, there has been some negative comments and criticism, a great deal of which is unwarranted. In fact I was at a recent seminar where second charge mortgages where described as a creepy uncle who turns up at family weddings and funerals and now has to be made to feel welcome by other family members.

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Don’t be afraid of debt consolidation

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

This has resulted in significant changes in the way master brokers and second charge lenders operate and it has been no surprise that in the past week the FCA have begun to cast a more critical eye over the industry.

Last week in Leeds, Mary Blackwell of the FCA drew brokers attention to the advisory process and explained that the regulators review of advice since the Mortgage Market Review (MMR) had shown that many mortgage advisors were still not collecting sufficient information about clients’ needs and circumstances’ before advising on products. This in turn leads to a failure to offer suitable products and this was further emphasised when advising on debt consolidation.

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Post MCD: The party’s only starting

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

In the past few months, we have all been busy preparing for the implementation of the Mortgage Credit Directive (MCD). Second charge mortgage brokers have been through the Financial Conduct Authority’s (FCA) authorisation process, enhancing procedures and systems as well as undertaking major training programmes to ensure their staff are up to speed with the different regulatory requirements and are, of course, competent.

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Who’s Giving the Advice?

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

In recent months I’ve attended numerous meetings, seminars/webinars and conferences in relation to the new regulatory framework and the impact this will have on the loans industry.

One such meeting was held in London last Wednesday, hosted by Robert Sinclair of the Association of Finance Brokers (AFB) and focused on the implementation of the Mortgage Credit Directive (MCD). The meeting was attended by a number of senior managers from firms of various sizes and distribution models, and it was interesting to hear the differing views and interpretations of the new rules.

During the meeting one question was asked, which in all honesty, I hadn’t given as much thought to as I should have done. As the majority of our business is introduced via mortgage advisers, the question ‘Who gives the advice?’ was posed.

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The Future Looks Bright..

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

Changes

I have read a number of reports and blogs in recent weeks regarding the changes in the secured loan industry. They focus on how affordability checks, FCA regulation and then the European Mortgage Credit Directive (MCD) will have an adverse impact on secured loan volumes and in deed it has been widely reported that someone, although I’m not sure who, has said that they may well reduce by 20%.

Cause for optimism

Personally, I’m much more optimistic about the future of this industry. It’s too easy to look at the forthcoming challenges and make pessimistic predictions, but this industry has always thrown up challenges to mortgage and loan brokers and we have managed to meet them.

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Payday Borrowers – We should start ‘screening’ now

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

I recently read the Loan Talk feature on publicity around payday borrowers and lenders, and specifically, the £2.6 million fine handed out to Wonga for sending hoax solicitor letters to already hard up customers. I know the letters were sent some time ago, but it does reflect the ethics of an organisation when this type of thing goes on. This was then again followed by the more recent news that another payday lender, ’Dollar,’ is to refund £700,000 to 6,347 customers. In reality, only £79,000 is actually being refunded – the £621,000 is to be taken from customers’ existing balances. Bearing in mind that these customers are in a position where they cannot afford to pay the loan, hence the fine in the first place, the debts will probably be sold to a collections agency and this will mitigate some of the losses to the lender.
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Are you ready for the 1st April?

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

Like many within the secured loan industry, I have spent many weeks preparing for the changes that will take effect on 1st April, when the Financial Conduct Authority (FCA) takes over the regulation of consumer credit from the Office of Fair Trading (OFT). I bet there is not one loan broker who hasn’t attended a presentation of some sort and had a senior person from a large organisation (usually within the legal profession) look knowingly at their audience and ask ‘are you ready for the 1st April yet?’
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Regulation, our biggest challenge

Gateway2Finance MD Paul Woodworth

Gateway2Finance MD Paul Woodworth

Last week, I was both pleased and honoured to be asked along with a number of senior (that’s position, not age!) industry members to attend a lunch hosted by Masthaven, the purpose of which was to have a general discussion about the secured loan industry and some of the challenges it faces.

One of those many challenges is, of course, regulation and it wasn’t long before the conversation moved to the responsibility for the regulation of consumer credit moving from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) on 1st April this year.
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