Industry heavyweights have expressed concern that brokers and conveyancers ensure they are adhering to the Mortgage Credit Directive which came into force today.
Industry heavyweights have expressed concern that brokers and conveyancers ensure they are adhering to the Mortgage Credit Directive which came into force today.
Eddie Goldsmith, chairman of the Conveyancing Association, warned that conveyancers had to be aware of changes from Europe that affect buy-to-let and second charge loans.
He 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.”
David Finlay, distribution director at the Northview Group, added: “The UK mortgage market should be relatively well-insulated against the impact of MCD, as our own Mortgage Market Review was designed with the European Mortgage Credit Directive in mind.
“But there are still some important considerations for mortgage advisers, most notably the requirement to consider secured loans alongside remortgaging for capital raising, and so while today is not as significant as M-Day or MMR, it is still an important juncture for the industry."
Jeremy Duncombe, director of Legal & General Mortgage Club, said: “Today is the day the long awaited Mortgage Credit Directive comes into force and we can start to measure the impact that the new regulation will have.
“The three key points of the MCD that the industry will feel the immediate effects of are the regulation of second charge loans, the conditions under which advisers may refer to themselves as independent, and the definition of consumer buy-to-let.
“All brokers should now be up to date and aware of all the regulatory changes impacting their clients.
“The impact that the MCD will have on brokers’ businesses will entirely depend on how well they have prepared for the new rules.
“We have been actively preparing with our members for the past year to help brokers work out what the changes mean for them and their clients.”
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.”
