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Regulatory changes for second charge mortgages 26/09/2014 The FCA has set out plans to bring second charge mortgages under FCA mortgage rules and laid out how it intends to implement the Mortgage Credit Directive.

Regulatory changes for second charge mortgages

The Financial Conduct Authority (FCA) has set out plans to bring second charge mortgages under FCA mortgage rules and laid out how it intends to implement the Mortgage Credit Directive.

The FCA has proposed that from the 21st March 2016 the regulation of second charge mortgages should move from the FCA’s consumer credit regime and instead will be governed by mortgage rules.  Under the proposals, second charge firms would be required to comply with FCA mortgage rules in areas such as affordable lending, advice, and dealing with payment difficulties.

It is consulting on the issue, looking particularly at:

  • bringing second charge mortgages into the existing mortgage rules
  • the authorisation process for second charge firms
  • the proposed data reporting requirements for second charge firms
  • plans to implement the mortgage credit directive
  • new knowledge and competency requirements,
  • obligations for firms dealing in foreign currency mortgages and
  • new levels of professional indemnity insurance.

“We recognise that second charge mortgages are beneficial for some customers but we are concerned that consumers can be put at risk by poor sales practices and ineffective affordability assessments,” said Christopher Woolard, FCA director of policy, risk and research. “Given the risk of consumer detriment, we want to embed good practice and we believe that applying our mortgage rules is the best way to do this.”

Comments are sought by 29th December 2014.
 

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