The FCA is slowly coming to grips with the nuances of the short term real estate funding market. As bridging only accounts for a tiny fraction of the overall UK lending market, it’s not been at the top of the regulatory body’s priority list. Still, over time we can expect the FCA to put every field of funding under its microscope, which means a constantly shifting set of regulations that bodies such as the NACFB need to keep fully up to date with, as we’re the first port of call for brokers wanting to check what has changed and what hasn’t.
The Mortgage Credit Directive is due to come into effect in March next year, and many expect it to have a significant impact on the short term lending market. Fortunately there’s been plenty of warning and it would be a foolhardy lender who was not fully prepared for its introduction.
As you may already know, the Mortgage Credit Directive concerns regulation of first and second charge mortgages and ‘consumer buy-to-let’ lending. It also applies to firms looking for help with applying for authorisation as a second charge mortgage firm or registration as a CBTL firm. The MCD comes into force on 21 March 2016.
From that date, it will introduce an EU-wide framework of conduct rules for mortgage firms while at the same time remaining closely aligned with the UK’s existing mortgage regulation.
The MCD applies equally to first and second charge mortgages, so the UK Government has decided that second charge mortgage regulation should move from the FCA’s consumer credit regime into its mortgage regime. In order to carry on second charge mortgage business after next March, lenders, administrators and brokers all have to be authorised and hold the correct mortgage permissions. There are fewer than four months to go until brokers will have to face new disclosure obligations and to ensure that customers are aware of all alternative finance options available to them. This includes second charge loans, but if a client chooses to opt for a second charge loan over a remortgage, for example, brokers are not obliged to advise on this transaction but can refer the business elsewhere – providing, of course, that they have the necessary level of regulation.
Some brokers may still be unaware that the post-MCD secured loan consideration period is going to be replaced by a seven-day reflection period on offer. And we’re keen that brokers should understand how a secured loan should be sold in the future when intermediaries may be able to apply directly to loan providers without the use of a packager.
Our recent Gala Dinner was a night for us all to look back with some pride not just at the past year but at everything that’s happened over the past eighteen months of regulation. Things might settle down a little over the coming eighteen months, but there will still be changes and everyone in the industry needs to keep on top of the regulations as they continue to evolve.
