We have recently attended the second wave of MMR intermediary workshops. For those of you who provide mortgage intermediary services and didn’t manage to attend, below is a brief bullet point summary from the day. Some information discussed on the day has already been covered in our previous news article, but is summarised below for completeness.

• The FCA will be re-issuing the preparedness survey in December and are looking to improve on the 68% response from advisory firms to the last one;
• All mortgage applications will need to have affordability stress tested to ensure that the client can afford a 1% increase in the interest rate within the next 5 years;
• For Interest-only mortgages there must be credible evidence of a repayment strategy;
• Income must be provable so no more self-certification;
• The intermediaries’ job is to introduce borrowers to lenders whose criteria they meet. For this reason there will be a responsibility on them to know what the eligibility criteria is;
• Definition of ‘advice’ has not changed;
• Disclosure – if clients continue using a version of the FCA disclosure documents they must remove the Key Facts logo and the ‘requirement to issue’ statement;
• If verbal disclosure is used the firm must be able to evidence how this is carried out i.e. T&C observations, checklists – best practice to document;
• If intermediary fees are charged as a percentage of the loan, flat fee or commission, then clear cash examples should be disclosed in a ‘clear and prominent’ manner;
• It must be clearly evidenced if a client positively elects to roll up fees;
• If a case is introduced to one lender and it is declined – the intermediary must try to understand reasons for this (the FCA does understand that it is not always possible if a reason for the decline is not given);
• It is anticipated that many intermediaries will not be offering an Execution-only (EO) services initially. However, if they do offer the service or one evolves then they should have a clear documented EO policy that could be used;
• The client has to positively elect to have EO, any policy must have a route map to get to EO, must set a level of business and of course EO must still be in the client’s best interest;
• Vulnerable customers (debt consolidation, equity release, sale and rent back and RTB) must receive advice in the first instance, even if after receiving advice, they decide to proceed on an EO basis;
• The FCA expects to be able to pick up a client file and read it like a book giving a seamless story, including soft facts / drivers / goals / aspirations and documented discussions;
• For advised products the FCA expects advisers to annotate any comparison tool document or make a note on the file, to clearly show why the recommended product is more suitable that any others listed e.g. why has the 7th in the list been chosen over and above the 6 above it?;
• For Further Advances, the adviser must inform the customer that the existing lender may be able to provide a further advance, although the adviser does not need to confirm or prove this;
• Systems and controls – staff should be qualified, adequate spans of control must be maintained, documented processes should be fit for purpose, advice should be monitored, appropriate MI should be recorded and monitored, relevant anti-fraud controls and record keeping systems should also be in place;
• A Supervisor must possess the relevant skills for their role i.e. coaching, feedback, monitoring, etc;  
• A firm should ensure they have a plan in place to ensure systems are ready and fit for purpose in time for implementation;
• Firms must develop systems and processes and make relevant changes;
• Firms should identify training that needs to be carried out and develop training plans;
• Firms must update relevant manuals;
• Firms should allow time to test and refine the changes before implementation;
• The FCA will develop and publish fact sheets, FAQ’s from workshops, track readiness in December and publish their findings.