Everything You Need To Know About Mortgage Regulation

Until midnight of Saturday 30th October 2004 the regulation of mortgage sales was done so on a voluntary basis which was overseen by the Mortgage Code Compliance Board (MCCB) – Lenders and brokers alike had pledged to adhere to this code which has now closed down.

This changed on the 31st October 2004 when a large section of the mortgage market came under statutory regulation. At this time, control of regulation was passed on to the Financial Services Authority (FSA).

The role of the FSA is to oversee the regulation of the financial services industry in the UK. The FSA is not a government department but is in fact a limited company – It has statutory powers, given to it under the Banking Act 1987. The FSAs board which makes its policy decisions is appointed by the treasury.

All mortgage brokers must be authorised by the FSA, either directly or through an authorised network/packager. You can check whether a firm is authorised via the register on fsa.gov.uk

What Are The Main Statutory Objectives Of The Financial Services Authority In Relation To Mortgages?

The FSA has been given a number of statutory objectives including:
# Maintaining confidence in the UK mortgage system.
# Promoting public understanding of the mortgage system.
# Securing an appropriate level of protection for consumers.
# Reducing the scope for financial crime.

What Are The Main Features Of Mortgage Regulation Under The Financial Services Authority?

Regulation as laid down by the FSA is statutory and any person or any organisation found breaking the rules could be subject to discipline – fines, bans and ultimately, jail time.

# The rules cover mortgage advice and sales, advertising and promotions.
# All mortgage advisors, whether you are a broker or a lender, must be authorised and regulated by the FSA.
# Any mortgage advisors must be suitably trained and professionally qualified.

In respect to mortgage sales and promotions, the FSA is very keen to bring about clarity to the mortgage market – in order that borrowers can effectively shop around and make informed decisions. Any mortgage advice, whether this is provided by a lender or a mortgage broker, must be accompanied with an Initial Disclosure document (IDD), and a Key Facts Illustration (KFI) before the borrower actually applies for the mortgage. These two documents have been standardised across the board in order to compare between different mortgage products.

What Is An IDD?

The initial disclosure document (IDD) must be provided to the borrower at the initial meeting, or if contact is via telephone, the key points must be summarised and explained with written documentation provided in writing within five working days. The IDD must cover the following points:

# Whether advice is offered or simply product information only.
# Whether the lender or broker has access to the whole of the mortgage market, or a limited panel – or even just one.
# Details of fees to be charged.
# Details of the complaints procedure – including a postal address for which to send in writing.

What Is A KFI?

A mortgage lender or broker must supply an accurate Key Facts illustration before a mortgage application is made. The KFI is a standardised document and must contain the following points:

# The total cost of the loan to be repaid.
# Any associated fees including the amount of commission that the broker earns subject to mortgage completion.
# The full details of the mortgage product including the interest rate, monthly payments and all fees.
# The risk of rate changes and the impact of payments.

DoesThe FSA Regulate All Types Of Mortgage Contract?

Buy-to-Let and commercial mortgages are not currently regulated by the FSA under the new regime.

What You Should Do In The Event Of A complaint?

Firstly you must try and iron out the complaint with the mortgage broker or lender. If a satisfactory response is not made then the complaint may be taken further to the Financial Ombudsman Service.

By : James Copper

Proper Planning for a Home Purchase Can Eliminate ALL of the Stress

Planning everything properly before striking the final deal on your new home purchase can make the transaction virtually stress free!

There is nothing more stressful than buying a new home. So, whenever you are determined to buy a new home, you need to plan properly. Evaluate various factors such as your financial status, size of the mortgage, the interest rate, community, and other important issues. You can simplify the complex steps of buying a new house by breaking the process into various steps.

Your budget is the most important thing that you will need to consider in buying a new home. As the price of the home is very expensive these days, you may need to research your finances very carefully before taking a mortgage. If your financial status is sound, then making that initial down payment shouldn’t be difficult.

Once you decide to buy a new home, you will need to begin the search. It is always advisable to get pre-approved for a mortgage. Searching for the right home can also be very complicated without the help of a real estate agent who possesses good knowledge of your chosen community. They can determine the type of house you may like, educate you about the community, and other important aspects of home buying. Don’t stop hunting for your new house soon after talking with just one agent. It is recommended that you contact several agents that may help you find your dream home.

When you’ve found that dream home after a long hunt, it’s time to find a loan so that you may finalize the deal. The size of your mortgage will depend upon the cost price of your home and your current financial status. Please check out and compare the policies, rules and interest rates of various lenders before you sign and find a loan that best suits your income and financial needs.

Don’t stop negotiating the price of the home. The more you can negotiate, the better, creating a lesser burden for you in future. Before making the final deal, carefully evaluate the new home, insuring that it contains all you want in your dream home.

When things strike the right note, it’s time for you to make a final deal. Your long stressful hunting is over now. The time has come for relaxation and the start of a new life in your dream home.

By : Jonathan Hansen

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