Second charge loans will come under the control of the Financial Conduct Authority from 1 April 2014 and following a period of consultation it is expected that they will be required to adhere to the Mortgage Conduct of Business rules.
Speaking at a Mortgage Introducer round-table on secured loans, sponsored by Precise Mortgages, Robert Sinclair, chief executive of the Association of Mortgage Intermediaries and the Association of Finance Brokers, said: “When the secured loan market becomes fully regulated becoming authorised and passing exams will be key. Brokers and lenders operating in this market need to think about how they will put in place a supervisory framework in place for CeMAP qualified advisers.”
Major regulatory changes are not expected to impact the second charge market until the end of 2015 but uncertainty around what these changes will look is causing concern in the industry.
Stephen Lawrence, group national sales manager for Norton Financial Services, said that while regulation was not a concern for them because they are “ahead of the game” getting a large workforce CeMAP qualified would take time.
“It took 12 months to get our first-charge brokers CeMAP qualified,” said Lawrence. “We need to know when we will expected to be fully qualified so we can begin the process.”
Matt Cottle, commercial director for secured loan broker y3s, said he expected the regulator to insist that the second charge market became CeMAP qualified but when that would happen “remained to be seen”.
He said: “As soon as the rules come out we will move swiftly to get all our brokers through their training and exams as quickly as possible. We have a workforce of about 50 brokers so we will do this in waves.”
Cottle said he would not be surprised if the paper second charge brokers were required to sit was slightly different and tailored for their industry.
He added: “If second charge brokers sit a different paper it raises the question; will mortgage brokers be required to sit an additional paper to bridge the two markets?”
