The Mortgage Market Review (MMR) rules will come into force on 26 April, leaving just weeks for lenders to ensure they are ready.
The reforms set out in the MMR and MMR Rules are intended to ensure access to mortgages for consumers who can afford it, so it is anticipated that most of the changes will affect the pre-mortgage offer stage, resulting in – hopefully – most transactions having no impact on the conveyancing process.
One of the key points for conveyancers under the MMR is where no formal mortgage has been issued as at 26 April 2014 (imagine your client only has an agreement or decision in principle from a lender) then the application will need to be underwritten using the new responsible lending rules.
Another key point is if a formal mortgage offer has been issued as at 26 April 2014 (so if your client’s application has been fully underwritten), the transaction proceeds as normal provided there is no material change to affordability between offer and completion.
Conveyancers also need to be aware that if a material change occurs in relation to affordability between mortgage offer and completion, the lender will have to re-assess the case using the new responsible lending rules and decide if they wish to continue with the offer, amend it, or withdraw it, with specific examples of what constitutes a material change available in the MMR rules.
Lenders will, however, have different policies in other circumstances and individual requirements and materiality thresholds for processing changes to mortgage applications, as well as managing pipeline cases in different ways to each other.
The MMR rules will also introduce a more detailed process for ‘advised’ sales, while ‘non-advised’ sales will cease and be replaced by ‘execution-only’ sales, with transitional provisions put in place for ‘advised’ pipeline cases.
The MMR was set up by the Financial Services Authority, which is now the Financial Conduct Authority, to review the mortgage sector after concerns about the market and the regulatory framework for mortgages arose in the wake of the financial crisis.
