The Council of Mortgage Lenders (CML) has expressed "serious concern" to the government over whether home information packs (Hips) will be implemented on time and the risks of making over-optimistic assumptions about their market impact.
In its report – Home information packs – the CML’s assessment of the new regime – the CML points out eleven weeks after 1 June 2007 was announced as the “go live” date for Hips, the government has still not published a detailed timetable for their implementation.
The CML argues: “Without this it is difficult to have confidence in the process at all.”
It believes there should be close scrutiny of the government’s performance against a detailed implementation timetable and, if there is any slippage in the delivery of Hips – which the CML says “is likely” – the 1 June 2007 date will need to be reviewed.
In addition, the CML is concerned neither the government nor the public fully understand how little impact the home condition report (HCR) element of the Hip will initially have on the mortgage process.
It argues the Hcr will not remove the need for lenders to conduct valuations on each transaction to assess potential levels of lending risk because, although the Hcr may reduce the number of physical valuations over time if it is “robust and easily accessible”, at the “go live” date most properties will still need a valuation inspection.
For consumers to realise the full benefits of Hcrs within the mortgage process, the CML says lenders need to have full electronic access to the Hcr databank and time to build and test their interaction with it.
Further, the CML states in its report the government must consider the possible impact Hips will have on the housing market.
It has already identified the likelihood of a “feast and famine” in the flow of properties coming into the market as a result of Hips going live, but it says Hips might also create other unintentional consequences.
It argues the Office of the Deputy Prime Minister (ODPM) needs to plan for the potential short and long-term market impact on the stakeholders involved in house buying and selling, in particular consumers.
It adds: “We are disappointed that as yet the government has done little to simulate the potential impact of Hips, and we urge them to do so urgently.”
Other key messages from the report include:
- The ODPM needs to encourage development of a home inspector certification scheme as soon as possible, providing start-up costs to the body that develops the scheme, if necessary;
- Any databank of Hcrs should have a single point of access to minimise the technological cost of delivering the full benefits of this policy and lenders should not be charged for access to the databank;
- A full cost-benefit analysis should be undertaken which recognises the additional costs to industry and consumers;
- The ODPM should publish plans for the “dry run”, including arrangements for monitoring and evaluation and what the success criteria will be; and
- The ODPM needs to liaise with the Land Registry on the introduction of e-conveyancing to ensure the maximum benefits can be derived by these complementary initiatives.
Michael Coogan, CML director general, says: “With only 16 months to go there is still a huge amount of work to do to make Hips a reality. The government must urgently publish a detailed timetable of action so that the market and consumers can know what to expect and when.”
Coogan says it is also vital the government addresses the potential consequences the implementation of Hips might have.
He adds: “Hips represent a huge change in the process of buying and selling a house and will undoubtedly impact upon the market, possibly in unintentional ways. The government must examine what impact the packs will have so that all stakeholders can be prepared for their onset.”
The Association of Mortgage Intermediaries (Ami) has also expressed concern about the “unintended consequences” of Hips, arguing last week that there must be safeguards to prevent Hips being used in an anti-competitive way which would restrict access to the full range of mortgage products.
Further, Ami says property companies, estate agents and lenders could use hips as a marketing tool for mortgages or associated insurance products targeted at the prospective house purchaser.
Although the rule relating to prohibited documents disallows the inclusion within the pack of any documents that are not required or authorised, Ami argues in practice this will be difficult to police.
It says the Financial Services Authority should confirm its stance that unregulated firms, such as estate agents which are not regulated for mortgage advice or arranging, must not breach the regulatory perimeter.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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