It has been revealed that the Government is to publish a consultation document which sets out plans to extend the scope of FSA regulation to include second charge and buy-to-let mortgages, and to protect borrowers when lenders sell mortgage books to third parties.
But the Council of Mortgage Lenders (CML) and the Finance & Leasing Association (FLA) have both expressed concerns about the need for regulatory upheaval.
Fiona Hoyle, head of consumer finance at the FLA, said: “Second-charge lenders are not opposed to a move to FSA regulation, but they have yet to be persuaded that there is a compelling case for change. The current legislative standards already provide comprehensive consumer protection, which is reflected in the low level of repossessions.”
Hoyle added that a division of regulatory responsibility between the FSA and the Office of Fair Trading could create confusion for lenders and consumers alike, and that adopting a ‘one-size fits all’ approach could damage the market and consumer choice.
The CML has backed the proposal to regulate second-charge lending and ‘broadly supports’ plans to take a closer look at the acquirers of mortgage portfolios when they are sold on by the originator, but has declared itself ‘agnostic’ on the topic of buy-to-let regulation.
In a statement, reacting to the Treasury proposals, it said: “If the aim is to protect amateur property investors from poor property investment decisions, then regulating the mortgage process – as opposed to the sale process – will not necessarily address this. There is little evidence of consumer detriment to buy-to-let mortgage borrowers arising out of their mortgage borrowing, so the case for extending regulatory scope here is not clear cut.”
The Treasury consultation setting out the details of the proposed legislation will close on 15 February 2010 and follows on from the Reforming financial markets document, published in July.
Exchequer secretary Sarah McCarthy-Fry said: “Since the onset of the financial crisis, the Government has worked hard to ensure mortgage borrowers are treated fairly by their banks and our focus has been to do all we can to make sure people can stay in their homes and to limit repossessions as much as possible.
“But we are aware that this crisis has raised issues around the world about the regulation of the mortgage market. We are determined to reform the system for the future, to offer both stronger protection for consumers and greater stability in the housing market.”
