In some cases project teams have already been assembled to dissect the small print of the directive while others are much further along planning phased roll out of changes and scheduling broker communications. There are others though, smaller firms, which are only now beginning to talk about the changes which Europe will bring to lay at our door from 21 March next year.
Distributors are best placed to know how ready the market is for MCD, from a lender, broker and regulatory perspective and exactly what brokers need to do to be ready for next year’s deadline. This week we’ve asked our panel of distribution experts which parts of MCD the industry is most advanced with and which areas are still on the drawing board.
Paul Shearman, proposition director – mortgages, protection and general insurance for Openwork, gives a run down on what brokers need to consider and the challenges lenders are grappling with.
Gemma Harle, managing director of Tenet Lime, focuses on the second charge market, its preparations and the advice conundrum this poses for mortgage brokers.
Toni Smith, sales operations director for First Complete, discusses the pipeline issue and when lenders are expecting to go live with compliant propositions.
Paul Shearman is proposition director – mortgages, protection and general insurance for Openwork
The European Mortgage Credit Directive (MCD) will soon be with us. Whether you are a lender or a broker you will need to make changes to the way you operate. Whilst the regulator has done its best to minimise the impact of the MCD, there are a raft of changes ahead of us. These include new disclosure rules, new style illustrations, new APR calculations, binding offers and consideration periods. There is also a new regime for buy-to-let lending and second charge, as well as new rules for foreign currency loans and revised requirements for intermediaries regarding PII cover.
Several lenders, most notably Barclays, Woolwich and Skipton have already started communicating with their key accounts, not only helping to educate on the impact of the MCD, but also wherever they can, outline their plans. Others I know are preparing to brief their sales teams on proposed changes. Staying ahead of the game and communicating early should be applauded.
A key issue is whether lenders will adopt the new European Standardised Information Sheet (ESIS) or make alterations to their current documents to create a KFI Plus. Most lenders I speak with appear to be going for the latter, but there are certainly a few, both large and small, biting the bullet and moving directly to adopt the ESIS. Whatever approach is adopted and at whatever point the documents are rolled out, engaging brokers early makes sense. Dealing with two different types of documents simultaneously won’t be easy, so the more notice the better. The same goes for the handling of pipeline business.
From a broker perspective, if you are not in a network, you should be looking to ensure your PII cover meets the new rules, deciding on whether second charges are within your scope and determining whether you need the permissions to operate in the consumer buy-to-let market. You’ll also need to review your disclosure documents and think through what processes you need to change to build into the MCD consideration period. If you are an appointed representative (AR), your network should be starting to outline how they plan to implement the MCD. For Openwork’s part, we’ll be including the MCD as part of our autumn road show programme across the country.
Gemma Harle is managing director of Tenet Lime
From an intermediary perspective, the changes are not significant, even in respect of the regulation of buy to let – as most intermediaries have treated all buy to let as a regulated product for some time.
There has been a good deal of open dialogue amongst the lender and intermediary trade bodies and the most intriguing aspect is how lenders will change their processes.
A lot of them have already confirmed they will move to a KFI Plus in the first instance and the majority have stated they won’t offer foreign currency mortgages. Those that intend to have stated how it will be handled.
Generally speaking, lenders and intermediaries seem to be well prepared despite there being a bit of a waiting game being played with regard to second charge lenders.
The main area of concern is the uncertainly about whether or not they will change their distribution policies and what shape secured loan products will take post-March 2016.
Additionally, how will sourcing for second charge loans be affected and what consequences will there be for master brokers?
Many brokers are considering if they are going to advise on second charge loans. Personally, I am unsure how many will step up and do so, or just settle for introducing.
Toni Smith is sales operations director for First Complete
Most lenders are already fully engaged with networks, building on experience and learning from the MMR, they seem to be engaging much earlier this time around and it is therefore a much more collaborative approach regarding how to work with brokers on this.
Lenders still appear to be exploring whether they will go with the ESIS or the KFI Plus, but my impression at the moment is that the majority of mainstream lenders are likely to launch with the KFI Plus.
The key issue is how to get the pipeline of business completed before 21 March, so it is likely, if things go to plan, that we will see a number of lenders launching with their MCD proposition in early January so that they can test their systems and iron out the inevitable glitches.
As a network I think we are ahead of the curve regarding the MCD, we have already kicked off a series of awareness training events for all brokers across the First Complete network so that they are aware of expected forthcoming changes and the timescales. As with MMR, we will continue to send out regular communications as it becomes clearer what route each lender is taking and impacts to sales process. We will then carry out more intensive training events next year in preparation of the go live date of the MCD so that every broker in the network is fully ready to operate under the new regime.
