In its News and Views newsletter, the CML restated the fact it would fight proposals to regulate buy-to-let lending and commercial-residential split properties, because it remains commercial not residential.
The trade body said the fact buy-to-let lending is calculated on rental returns, not income and affordability puts buy-to-let outside the scope of the directive, an argument the Treasury supports.
The CML also said it will fight the proposed European Standardised Information Sheet (ESIS) because it will cost the industry tend of millions of pounds to implement, alongside the fact UK lenders have been obliged to offer Key Facts Illustrations (KFI) since 2004.
The Treasury proposes that European countries should be able to use their own disclosure formats as long as they provide the right information for borrowers.
On credit assessments, The Treasury is keen to delete article 14(2) from the directive, suggesting lenders may have to refuse mortgages to borrowers with a ‘negative assessment of creditworthiness.’
The CML said this is too blunt a tool and impractical, where borrower circumstances suggest their incomes may rise over time, for example.
It also asks if this might conversely create a right to a mortgage, which could lead to litigation if a consumer is turned down.
Making lenders give applicants a detailed explanation for the rejection of their application is another concern, said the CML.
“This could lead to litigation and create legal uncertainty, and would certainly add disproportionately to administrative requirements and costs,” adding that feeding this kind of detail back could even arm fraudsters. The CML also said lenders were not keen to expose their automated systems to scrutiny as the information is commercially sensitive. The Treasury backs this sentiment.
On advice, the EC proposals suggesting lenders should offer advice on products other than their own was unrealistic.
“Since 2005, lenders have been increasingly providing advice to borrowers in the UK. In 2010, 49% of all mortgages sold direct by lenders were sold with advice, some 26% of the overall market,” it said. The Treasury is happy to keep status quo, as long as customers are clear about the market range of their advice.
The number of ‘delegated’ acts in the directive also concern the CML, which may slip through without consultation or cost benefit analysis, including the EC’s affordability and ESIS proposals.
The CML said a tailored approach without introducing rules unilaterally would make the most sense. The benefits to consumers had to be weighed against the benefits of any new rules, it said, with the responsibilities of borrowers raised up to meet those of lenders.
The final version of the Directive is expected at the end of this year, well before the final Mortgage Market Review proposals, which are still on an uncertain timeline.
“It is important for the mortgage market to have a coherent set of regulatory proposals that do not require expensive piecemeal changes which will not benefit consumers,” said the CML.
“Many systemic and cultural differences in national markets exist that the directive cannot address. In our view, neither lenders and intermediaries nor consumers have any significant appetite for lending or borrowing across national boundaries,” it added.
