HML recently held a webinar about MMR and the implications for mortgage origination, this was chaired by Richard Hennah from HML, Michael Coogan at Deloitte and Claire Davey from Skipton Building Society.

1. MMR and the implications for mortgage origination
web discussion
29th April 2013, 12:30-1:15pm
Chaired by Richard Hennah, Commercial Director at HML

2. Agenda
• Introduction – Richard Hennah
• MMR – what’s the rush? – Martin Berry, Head of
Compliance at HML
• A case study: Skipton Building Society – Claire Davey,
Head of Skipton Direct
• What’s happening in the wider industry? – Michael
Coogan, Strategic Adviser and Ambassador at Deloitte
UK
• Questions
• Next steps – Richard Hennah
© HML 2013. All rights reserved.

3. Martin Berry, Head of Compliance at HML
MMR – What it is
Mortgage Market Review (MMR)
 The FSA’s stated intention was to create a mortgage market were common sense is at
the heart of the proposed new regime intended to create a more sustainable market for
both the lender and borrower; and
Key Changes:
 Removal of ability for Lenders and Brokers to undertake Non-advised Sales, (including
further advances) a sale will be an advised sale if there is any spoken or interactive
dialogue with the customer during the sales process; there are some exceptions eg
High-Net-Worth customers, Execution Only etc
 Lenders must consider total affordability and take into consideration future interest rate
changes & potential changes in personal circumstances (This includes income
verification in all cases and a more detailed affordability assessment)
 Interest-only mortgages can only be offered where there is a credible repayment
strategy.
© HML 2009. All rights reserved. 3

4. Execution-only sales and variations
• Execution-only sales restricted to cases where:
– there is no spoken or other interactive dialogue between the firm and the customer
during the sale; or
– if there is spoken or other interactive dialogue between the firm and the customer
during the sale:
• the customer is a high-net-worth mortgage customer; or
• the customer is a professional customer; or
• the loan is solely for a business purpose;
and in each case the customer has positively elected to proceed with an execution-
only sale and (in the case of a professional customer) identified the product he
wishes to purchase; or
– the customer has rejected advice, identified the product he wishes to purchase and
positively elected to proceed with an execution-only sale.
In each case certain requirements must be satisfied.
(MCOB 4.8A.2)

5. Requirements of execution-sales (MCOB
4.8A.14)
• The customer has identified the mortgage or variation* he requires, specifying:
– Name of lender
– Interest rate
– Interest rate type e.g. fixed, variable, etc
– Price or value of property* (estimate where necessary)
– Length of term required*
– Sum wishes to borrow*
– Interest-only or repayment
• The customer has been informed in a durable medium (save for HNW or business loans):
– Customer will not benefit from protections of rules on assessing suitability
– If there is spoken dialogue – above information must also be provided orally
– Customer confirmed in writing he is aware of loss of protections and is making a
positive election to proceed with an execution-only sale (confirmation must be
contained in same document as above information)

6. Claire Davey, Head of Skipton Direct at
Skipton Building Society (SBS)
MMR – what it means for SBS
• Increased regulation
• Fully advised including additional loans and rate switches
• Evidence, evidence, evidence!
• Customer outcomes

7. Operational Model
• Shift from branch based advisers to a centralised team
• Consistent advice
• Improved T&C regime
• Slick and efficient service
• Adaptable
• Compliant

8. The telephone appointment was seen as quick and efficient
 Quick: 20 – 45 minutes, which most felt is an
acceptable length of time. Not too long, but long
enough to feel reassured that enough information is
being gathered
 A small proportion of customers had a call that
lasted up to 1 ½ hours, but this suited their
requirements as they didn’t feel rushed and
had enough time to ask questions
 Convenient: When booking the appointment Skipton
was flexible and booked the appointment to suit the
customer’s needs
 Efficient: Covered the important and necessary details,
without seeming to ‘waste time’
 Easy to follow: Call format is seen as straight forward
and easy to follow
Customers that were happy with the
phone call had their expectations
managed pre- telephone
appointment
Pre-appointment
expectations
• Fully informed of the purpose of
the telephone call, that it would
be the formal mortgage
application process
• Informed of the likely length of
the telephone call
• Fully briefed on all of the
information that they would
need to have to hand e.g. bank
statements, payslips etc.
Therefore, they felt that the telephone
appointment was …..
“Not very long at all
really, less than half an
hour”
“About 40 minutes, which
was fine as it covered what
I needed”
“Yes felt fully prepared
for it, not daunted at all ”

9. Michael Coogan, Strategic Adviser and
Ambassador for Deloitte UK
Wider market context
• Market activity increased modestly
• Relationship with mortgage intermediaries
• Funding for Lending Scheme extended
• Help to Buy: equity loan scheme launched
• Help to Buy: mortgage guarantee scheme in 2014?
• Mortgage credit directive to follow

10. © HML 2013. All rights reserved.
Wider market context continued
• Deleveraging by banks to continue
• Enhanced competitive appetite amongst mutuals
• Impact of legacy problems on lenders will continue to unfold over time
• FCA regulatory policy will evolve (interest only mortgages and forbearance
treatment)
• Borrower appetite in a low growth, high unemployment environment?
• Will the MMR transition be smooth over the next 12 months?

11. Questions
© HML 2013. All rights reserved.