The Financial Secretary to the Treasury has recently announced a package of measures intended to enhance consumer protection in the mortgage market.
The new measures will:
– Transfer the regulation of new and existing second charge residential mortgages from the Office of Fair Trading (OFT) to the Financial Services Authority (FSA), to ensure consistent standards of consumer protection and simplify the regulatory environment for lenders and borrowers
– Ensure consumer protections are maintained when a mortgage book is sold by a mortgage lender to an unregulated firm
– Extend the current regulation of the sale and rent back market to all providers, to ensure appropriate protection for consumers.
Mark Hoban, Financial Secretary to the Treasury said:
“The Government believes that this package of measures will enhance protection for consumers in the mortgage market. Giving the FSA responsibility for the whole residential mortgage market will simplify the mortgage regulation landscape for consumers and lenders.
"This will ensure that existing second charge mortgage borrowers who fall into arrears or face repossession on both first and second charge mortgages benefit from being regulated by a single organisation, maximising consumer protection and ensuring a more coordinated approach between lenders.
"The measures on mortgage books and sale and rent back have been introduced to address a genuine gap in the regulatory architecture, and will ensure consumers will be better protected in the mortgage market.”
Commenting on the measures, Paul Broadhead, Head of Mortgage Policy at the BSA, said;
"In principle the measures announced by the Government today are sensible. Any tightening of the underwriting criteria of first charge mortgages, through rules imposed by the FSA, has the potential to drive customers to other forms of credit, such as second charge mortgages. These loans are often more expensive and are subject to a different regulatory structure.
Bringing second charges mortgages under the FSA remit will help ensure that there is consistency in regulation and could make it simpler for consumers.
The BSA is also supportive of the proposed regulation of firms that purchase mortgage books and the expansion of sale and rent back criteria, to prevent consumer detriment in this market.
However, the HM Treasury announcement today adds to the weight of regulatory proposals the FSA needs to consider.
As we have consistently stated, it remains vital that the FSA assess in detail the cumulative impact of all the proposals to prior to pressing ahead with implementation, particularly to ensure that the revised regulations facilitate the desired outcomes for UK consumers."
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