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CML supports “policing perimeter” of bridging market

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  • 04/09/2012
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CML supports “policing perimeter” of bridging market
The Council of Mortgage Lenders has come out in support of the FSA's determination to "police the perimeter" of the bridging market to ensure regulated business is not being written in the unregulated sphere.

The trade body said in its latest News and Views it has no evidence this is the case, but warned consumers must be alive to the extra costs and risks associated with borrowing for a home in the unregulated space.

The CML also warned the reputation of good lenders could be at risk from the activities of less scrupulous lenders and brokers operating in this niche area.

“We support the efforts of those lenders who are making efforts to increase transparency and raise standards, and we welcome increased regulatory scrutiny on a timely basis to ensure that legitimate lending in this market is sustainable and built on solid foundations,” it said.

The CML aligned itself with the regulator by saying those selling bridging loans must make sure a mainstream loan wouldn’t suit a borrower better and that a loan exit strategy exists.

It added it was keen to make sure the sector is not “regulated out of existence” but said the ‘hype’ about the sector alongside the regulator’s concern raised questions about current business practice.

“Given the relatively small-scale and fragmented nature of parts of the bridging market, this may mean that an even wider variety of practice exists in the unregulated sector than in the regulated sector in which the FSA is taking an interest,” said the CML.

The trade body said this shouldn’t matter as no unregulated first-charge residential lending should be going on, it added.

“But there remains a sense of unease that has emerged in the absence of a clear and transparent environment,” said a CML spokesperson.

The FSA warned in mid-August it would take action against firms promoting bridging as an alternative to sale and rent back.

A fortnight before that, the regulator sent a survey to regulated bridging lenders demanding an explanation of their interest rate calculations warning any lenders found overcharging, their customers would have to be redressed.

 

 

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