A 334 page-consultation published today, CP14/20 sets out the regulator’s plans to fold the mortgage credit directive (MCD) into the mortgage regulatory framework from the 21 March 2016.
The full title of the paper is CP14/20 Implementing the Mortgage Credit Directive and the new regime for second charge mortgages.
Under the proposals, second charge firms would apply mortgage rules on affordable lending, advice, and dealing with payment difficulties.
Christopher Woolard, FCA director of policy, risk and research said: “We recognise that second charge mortgages are beneficial for some customers but we are concerned that consumers can be put at risk by poor sales practices and ineffective affordability assessments. Given the risk of consumer detriment, we want to embed good practice and we believe that applying our mortgage rules is the best way to do this.”
Jonathan Harris, director of mortgage broker Anderson Harris, endorsed the move, adding: “Bringing second charge mortgages under the regulator’s jurisdiction is long overdue. It is astonishing that they were previously unregulated when the charge is normally secured against a borrower’s home.”
“It will regulate an area of the market that can be vulnerable to sharp practices and protect those who may be desperate because they need to take on extra borrowing in the first instance.”
Meanwhile, the FCA said it plans to implement the Mortgage Credit Directive largely ‘through reliance on existing mortgage rules.’
However, two areas will be treated differently – product disclosure and annual percentage rate of change – requiring full harmonisation with the new European rules. A number of other changes will also be implemented including new knowledge and competency requirements, obligations for firms dealing in foreign currency mortgages and new levels of professional indemnity insurance.
Yesterday, panellists at the FSE yesterday speculated regulation of the buy-to-let market is likely to be applied to the whole market, not just ‘accidental landlords’ as previously thought.
All responses to the FCA must be in by the 29 December 2014. The regulator plans to publish its resulting rules by Q1 2015 with final implementation by 21 March 2016.
For the full consultation paper, click HERE.
