Contents of the letter sent by the FCA to broker firms have been shared exclusively with Specialist Lending Solutions and highlight the regulator’s approach.
Specialist Lending Solutions understands six firms are part of this initial phase targeted to obtain a spread of views within the market, including identifying best practice among firms.
It appears the regulator is also emphasising the expectation of brokers to have fully enacted Mortgage Conduct of Business (MCOB) rules in the two years since the sector was brought under the regime.
In the letter, the FCA said: “Firms have had over two years to embed MCOB (Mortgage Conduct of Business) and as part of our work of understanding the second charge mortgage market we want to review a small sample of firms who operate as a master broker in this market.”
The FCA added that following this initial consultation it may visit firms to follow-up the findings or publish results as part of wider communications.
It said: “Following our review of the information provided, we may choose to visit some or all of the firms in the sample. You will be contacted separately to arrange such a visit if your firm is selected.
“We will provide individual feedback to each firm in our sample in due course. The findings from this work might also be used in sector-wide communications.”
The FCA began investigating the second charge sector last year, including taking action on some lenders and issuing a Dear CEO letter to lenders warning to take action over certain lending practices.
Following that review, the industry was aware that the regulator would be highly likely to examine the distribution side of the market as well.
Earlier this month, One Savings Bank and Precise Mortgages warned that some master brokers were refusing to obtain bank statements from borrowers.