CP10 -28 - More on Mortgages

Another day, another 99 pages from the FSA and comments invited by 25th Feb 2011

http://www.fsa.gov.uk/pubs/cp/cp10_28.pdf


The proposals cover regulated mortgage transactions - but there are hints that further papers are likely to cover business loans, BTL, 2nd Charge etc.

Key points for comment include:

Replacing the requirement for an IDD with a requirement to disclose information on remuneration and scope of service at an early stage in the process - either at the first meeting or within 5 days in the case of telephony based contact. But it is still ok to use a Combined IDD.

Replace "Whole of Market" with "Independent" and if you are not "Independent" then you must be "Restricted" - simple.

"Independent" will no longer be required to give the client a fee option.

"Independent" will need to inform the client if "Direct only" products are not considered.

"Restricted" will need to advise if one provider or multiple together with details of any further restrictions.

 All Mortgage arrangers / advisers will have 30 months to achieve level 3 qualification status. There was a hint that level 4 may be the target at some point in the future - time to complete those exams. All arrangers and advisers to become CF31's.

Non advised sales - the products need to be "appropriate" and affordable; but income verification will be the responsibility of the lender and not the intermediary.

Firms can forget about sophisticated investors or streamlined service option - the affordability tests will apply to all transactions.

Where a Firm has given advice and the client rejects that advice then they CANNOT arrange an insistent Customer mortgage - not sure quite how that is going to be enforced.

Firms that use the internet to generate filtered enquiries / sales will need to ensure that the staff within the Firm writing the suitability questions are level 3 qualified.

The FSA have concerns that Intermediaries are not taking into account when clients have a mortgage term that extends into Retirement - can do better.

Adding Arrangement Fees to the loan has not been banned - but if they are then 2 KFI's will need to be provided to the client one with fee added and one without. The client will need to give their express consent to
add the fee to the loan.

Firms will need to improve their record keeping arrangements - prove that you are complying with the new regime

Firms will need to make an Oral disclosure to the client about fees and scope of service. If the transaction is via the internet then the client will be required to "pass through a gateway" to ensure that they have seen and are aware of the scope / fees issue. Hiding the details as a link is not permitted.

Suitability letters - still not compulsory (I think that they should be).