FSA to take over regulation of second charge mortgage lending

[Amethyst]

Government announces package of measures to enhance consumer protection in the mortgage market - HM Treasury


6 January 2011 Government announces package of measures to enhance consumer protection in the mortgage market

The Financial Secretary to the Treasury, Mark Hoban, today announced a package of measures intended to enhance consumer protection in the mortgage market. These 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; and
• 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:
“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.”
The statutory instruments will be published later in 2011. In advance of this, the Government expects the FSA to begin work immediately to implement these measures.

• Enhancing consumer protection in the mortgage market

Notes for editors

1. First charge mortgages are already regulated by the Financial Services Authority and will be regulated by the Consumer Protection and Markets Authority (CPMA) once it has been established.
2. An additional measure relating to a devolved matter – providing an exemption from FSA regulation for registered housing associations in Northern Ireland – has also been included in the package.
Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk
This Press Release and other Treasury publications are available on the HM Treasury website hm-treasury.gov.uk For the latest information from HM Treasury you can subscribe to our RSS feeds or email service.
Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.

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[banker_rhymes_with]

Re: FSA to take over regulation of second charge mortgage lending

Hello Amethyst!

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.

Let me translate that from pro-bank toothless regulator speak into Plain English...

Bend over people and kiss goodbye to the protection afforded to you via s140 of the Consumer Credit Act 1974, which currently offers some powerful Judicial protection to anyone being treated unfairly in relation to a Second Charge Mortgage.

To put this into context, anyone in the same position as Peter Bentley (see below), will soon be at the mercy of the far less Consumer friendly Financial Services and Markets Act 2000 (FSMA 2000):

Five-Year Block on Repossession

The only "genuine gap in the regulatory architecture" is the fact that FSMA 2000 does not have a s140 equivalent to give that Act some real teeth to protect Borrowers when they are being treated unfairly.

STOP PRESS:

Here's the real reason for this change:

See Page 2 here:

Impact Assessment Second Charge Mortgages (PDF 243KB)

There is a cost saving to lenders from not having to be CCA licensed. We estimate that 15 lenders of the current market of 25 lenders will choose to offer only FSA regulated products, saving £820 per CCA licence fee renewal. This equates to a cost saving of £21,000 NPV over 10 years. There is an annual cost saving to the OFT of £500,000, which equates to a saving of £4.3m NPV over 10 years.

Cheers,
BRW

[jumper999]

Re: FSA to take over regulation of second charge mortgage lending

So does that mean that people will not be able to challenge their agreements or second loans anymore using the s140 unfair relationship?

also when is this going to take place as far as I have read it will be Dec 2012?

[Amethyst]

Re: FSA to take over regulation of second charge mortgage lending

As a result of the transfer, second-charge mortgage lending would be brought within the scope of the FSA’s existing mortgage regime, and would be carved out from the scope of the CCA by the same exemption that applies currently to FSA-regulated mortgages

I dont think exactly what is happening will be clear until the stat parts are completed and published, there was a shed load of consultation and reports prior to this announcement tough so it isnt completely out of the blue, but basically I think it will move second charge lending in to the exempt agreements part of the CCA (sec 16?).

Also not sure if it is a good thing it will cause these estimated 15 lenders to leave the unsecured market and concentrate on secured lending?

[figaro123]

Re: FSA to take over regulation of second charge mortgage lending

What is the latest on this. I have a strong case for a unfair relationship claim. How will this affect me

Thanks