Mortgage News
FCA admits MCD referrals would create ‘disjointed transaction’
Borrowers will face a ‘disjointed’ mortgage application process if brokers decide to refer second charge business following the implementation of the Mortgage Credit Directive (MCD), the FCA says.
Responding to a question from a member of the audience at FSE London, Keith Hale mortgage technical specialist at the Financial Conduct Authority (FCA) said mortgage advisers could use the MCD changes as a business opportunity to ensure a smoother transaction for customers.
From 21 March 2016 second charge mortgages will be aligned with first charge products to be regulated by the FCA. Firms that choose not to deal with second charge transactions will be required to act as an introducer and refer the customer on to a different firm.
Hale said: “Longer-term there is a business opportunity here in terms of firms positioning themselves as the holistic answer. Quite how you get to that and whether you will be able to get to that for 21 March, I realise those are challenging questions for the industry.
“If you think in consumer terms, the introduction away to another form of advice for a different product provides the customer with a service, but it also makes for a disjointed transaction. Smart people will see a way of making that a smoother transaction from which consumers will gain and businesses which move quickly, I imagine will gain as well.”
Hale emphasised the changes that the MCD brought to second charge firms were big, but highlighted that the regulator did not intend to create ‘a sea change’ to mortgage regulation as a result. Challenges for second charge lenders will include arrears handling, implementation of the correct systems and underwriting standards that meet the FCA’s expectations, he said.
What mortgage and protection advisers should take from the FCA’s AI stance
Sponsored by Sesame Bankhall Group
He added that the market would be in ‘a state of flux’ for some time as lenders started to roll out their start dates for the rules over the coming months.
“From next week firms can choose to adopt our rules and adopt the directive,” Hale said.
“The directive does not deal with sales that are in the pipeline, they apply to any transaction that is not completed on 21 March next year. Mortgages are not sold in a day, so lenders and intermediaries need to think of those sales which have started in the coming months. If you have a view that those sales are not going to have completed by then you need to think about how the directive standards are already being delivered.”