One of the most important pieces of the mortgage regulation jigsaw is now ready - the FSA recently published the final conduct of business rules for mortgage activities. The FSA are also giving firms the opportunity to pre-register for the new streamlined application packs through their website.
The FSA have now released the final conduct of business rules for mortgage firms. These rules will allow mortgage lenders, intermediaries and administrators prepare their businesses for FSA regulation after 31 October 2004. For those firms who have still not decided whether they will be applying for direct authorisation or seek appointed representation status there is little excuse to delay the decision further. Those firms wishing to apply for direct
authorisation will have to show the FSA in their application that they are ready, willing and able to comply with the new rules by 31 October 2004 so any major gaps will have to be addressed before the application is submitted.
FSA have a maximum of 6 months to consider an application (provided the application forms are properly completed) so firms should now be looking very closely at the rules so they can lodge their application in time. In fact early applications (before 31 March 2004) will be rewarded by FSA with lower application fees. The FSA is also encouraging businesses to obtain application packs early by registering for applications on their website -
http://ww.fsa.gov.uk/mgi/
The significant points in the final rules are:
- records of suitability decisions by an adviser should now be kept for 3 years from the date of the recommendation
- self-certification of a borrower's income will be permitted where "appropriate". The FSAs softening of their approach on self-certification is unfortunate given the recent controversy on the way some advisers abuse lender's policy on verification of income.
- a tolerance level of 1% or £1 has been introduced for the intermediaries providing a KFI from a third party sourcing system.
- the removal of the confusion in CP186 on disclosure of commission which so that fees paid to packagers for outsourced activities will no longer have to be disclosed in the KFI.
- a relaxation of the strict conduct of business rules for firms dealing with a borrower who intends to borrow for their business.
- client money rules will not apply to intermediaries who hold client money but such intermediaries will be expected to hold more capital.
- in the general conduct of business chapter – MCOB2 - there is a new section on High Pressure Sales. Among the activities that should be avoided is the practice of providing an illustration, an offer letter and a mortgage deed in one pack and asking the mortgage deed to be signed at the same time.
- it will, in limited circumstances, be possible to issue a prescribed offer letter in place of the key facts illustration.
MortgageMaster
Whether you are a lender, administrator, broker or other intermediary, if you would like to find out how CMS Cameron McKenna can help you prepare for the FSA regulation of mortgage businesses please click here to view our MortgageMaster brochure. This will open a PDF in a new window.
Alternatively, if you would like to discuss your firm's preparations for regulations and how we may be able to help, please contact:
Paul Edmondson
Partner
CMS Cameron McKenna
+44 (0)20 7367 2877
paul.edmondson@cms-cmck.com
Mayoor Patel
Regulatory Adviser
CMS Cameron McKenna
+44 (0)20 7367 2984
mayoor.patel@cms-cmck.com
Jean Price
Assistant Solicitor
CMS Cameron McKenna
+44 (0)20 7367 3353
jean.price@cms-cmck.com
