Everything You Need To Know About Mortgage Regulation

Everything You Need To Know About Mortgage Regulation



Everything you​ Need to​ Know About Mortgage Regulation
Until midnight of​ Saturday 30th October 2004 the​ regulation of​ mortgage sales was done so on​ a​ voluntary basis which was overseen by the​ Mortgage Code Compliance Board (MCCB) - Lenders and brokers alike had pledged to​ adhere to​ this code which has now closed down.
This changed on​ the​ 31st October 2004 when a​ large section of​ the​ mortgage market came under statutory regulation .​
At this time,​ control of​ regulation was passed on​ to​ the​ Financial Services Authority (FSA).
The role of​ the​ FSA is​ to​ oversee the​ regulation of​ the​ financial services industry in​ the​ UK .​
The FSA is​ not a​ government department but is​ in​ fact a​ limited company - It has statutory powers,​ given to​ it​ under the​ Banking Act 1987 .​
The FSAs board which makes its policy decisions is​ appointed by the​ treasury.
All mortgage brokers must be authorised by the​ FSA,​ either directly or​ through an​ authorised network/packager .​
You can check whether a​ firm is​ authorised via the​ register on​ fsa.gov.uk
What Are the​ Main Statutory Objectives Of the​ Financial Services Authority in​ Relation to​ Mortgages?
The FSA has been given a​ number of​ statutory objectives including:
# Maintaining confidence in​ the​ UK mortgage system.
# Promoting public understanding of​ the​ mortgage system.
# Securing an​ appropriate level of​ protection for consumers.
# Reducing the​ scope for financial crime.
What Are the​ Main Features Of Mortgage Regulation Under the​ Financial Services Authority?
Regulation as​ laid down by the​ FSA is​ statutory and any person or​ any organisation found breaking the​ rules could be subject to​ discipline - fines,​ bans and ultimately,​ jail time.
# the​ rules cover mortgage advice and sales,​ advertising and promotions.
# All mortgage advisors,​ whether you​ are a​ broker or​ a​ lender,​ must be authorised and regulated by the​ FSA.
# Any mortgage advisors must be suitably trained and professionally qualified.
In respect to​ mortgage sales and promotions,​ the​ FSA is​ very keen to​ bring about clarity to​ the​ mortgage market - in​ order that borrowers can effectively shop around and make informed decisions .​
Any mortgage advice,​ whether this is​ provided by a​ lender or​ a​ mortgage broker,​ must be accompanied with an​ Initial Disclosure document (IDD),​ and a​ Key Facts Illustration (KFI) before the​ borrower actually applies for the​ mortgage .​
These two documents have been standardised across the​ board in​ order to​ compare between different mortgage products.
What is​ An IDD?
The initial disclosure document (IDD) must be provided to​ the​ borrower at​ the​ initial meeting,​ or​ if​ contact is​ via telephone,​ the​ key points must be summarised and explained with written documentation provided in​ writing within five working days .​
The IDD must cover the​ following points:
# Whether advice is​ offered or​ simply product information only.
# Whether the​ lender or​ broker has access to​ the​ whole of​ the​ mortgage market,​ or​ a​ limited panel - or​ even just one.
# Details of​ fees to​ be charged.
# Details of​ the​ complaints procedure - including a​ postal address for which to​ send in​ writing.
What is​ a​ KFI?
A mortgage lender or​ broker must supply an​ accurate Key Facts illustration before a​ mortgage application is​ made .​
The KFI is​ a​ standardised document and must contain the​ following points:
# the​ total cost of​ the​ loan to​ be repaid.
# Any associated fees including the​ amount of​ commission that the​ broker earns subject to​ mortgage completion.
# the​ full details of​ the​ mortgage product including the​ interest rate,​ monthly payments and all fees.
# the​ risk of​ rate changes and the​ impact of​ payments.
DoesThe FSA Regulate All Types Of Mortgage Contract?
Buy-to-Let and commercial mortgages are not currently regulated by the​ FSA under the​ new regime.
What you​ Should Do in​ the​ Event Of a​ complaint?
Firstly you​ must try and iron out the​ complaint with the​ mortgage broker or​ lender .​
If a​ satisfactory response is​ not made then the​ complaint may be taken further to​ the​ Financial Ombudsman Service.




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