The implementation of the Mortgage Credit Directive, the main upshot of which is the introduction of a seven day reflection period for clients, has been welcomed by finance brokers The Loans Engine.
The Loans Engine say they were one of the first second charge specialist finance brokers to receive formal confirmation from the FCA that its application for the permissions necessary to continue broking second charge mortgages under the MCD had been approved.
They believe the MCD brings with it an inherent fairness based upon mortgage advisers having to now actively consider all the options available to capital-raising clients, such as second charge mortgages, and not simply being able to default to a remortgage recommendation.
According to The Loans Engine, ender MCD, all mortgage advisers have had to decide whether they wish to provide advice on second-charge mortgages themselves, or introduce and refer to a specialist master broker like The Loans Engine. Those choosing to provide the advice can also utilise master brokers to support their provision of second-charge mortgage quotes to clients and to provide packaging services.
The Conveyancing Association’s Eddie Goldsmith warns that conveyancers will have to make note and update their practices now the MCD has come into force.
Eddie Goldsmith said: “The introduction of the MCD brings with it a number of changes not least the full statutory regulation of second-charge mortgages plus the introduction of the new ‘consumer buy-to-let’ definition. Alongside these fundamental amendments, there are some significant changes for conveyancing firms to be crystal clear on including the new requirement for lenders to provide their customers with a ‘reflection period’ which must last a minimum of seven days and begins when the lender issues its binding Offer of Loan. To complicate matters, customers are allowed to waive their reflection period and lenders are approaching this in different ways – some are considering the submission of the Certificate of Title sufficient waiver of any outstanding period of reflection, while others will require a formal acceptance – despite the fact that the CA’s own preference was for the former rather than the latter.
“This does mean that conveyancers will need to, for example, update their mortgage checklist to record whether a formal acceptance is required, update estate agents and referrers so they are aware there may be delays if a required formal acceptance is not returned promptly, and update their mortgage report to advise the client of the reflection period and how they can waive it if they wish to. CA members have already been issued with the type of draft wording which can be included in their mortgage report to reflect these changes.
“All in all, for the ‘mortgage world’ and its stakeholders the MCD brings with it significant change and the need to ensure systems and processes are compliant with the new rules. It is therefore important that the conveyancing profession is up to speed with these new developments, firms are working with the right information, are clear on how others will be approaching MCD, and have the necessary checks and balances in place to ensure a smooth transition.”
Ryan McGrath, Chief Executive of The Loans Engine, said: “The MCD has been a long time in the making but it is now a fully fledged part of UK financial services law, and we at The Loans Engine wholeheartedly welcome a directive which is a great leveller particularly between the first and second-charge mortgage markets. For too long, the potential of second-charge mortgages to provide the right solution for capital-raising clients has often been overlooked, but now with these new rules, clients will be made fully aware of the alternatives to a remortgage and will be provided with up-to-date information to make a fair comparison.
“We have already begun working with many mortgage networks and advisory practices that have recognised their need to work with a specialist master broker in this area. A significant amount of work has gone into securing the necessary authorisation, beefing up our technology platform, and ensuring we are ready today to begin dealing with the introductions, quote requests, and packaging needs.
“Today is a ground-breaking and monumental day for the second-charge market as this is finally the level playing field the sector wanted and needed. We are looking forward to forging ahead in this new environment and would urge any adviser or network that is looking for support in this area to get in contact with us as soon as possible.”
