MMR regulation - Key issues for intermediaries

MMR regulation - Key issues for intermediaries


The publication of the MMR Policy Statement is an ideal time to consider some of the key issues that will impact bridging intermediaries and their business models. Ray Cohen, compliance expert and MD of Jackson Cohen, outlines the main highlights:


• All interactive sales will have to be advised unless the borrower qualifies to opt out for an execution only route as a mortgage professional, High Net Worth (HNW) individual or business borrower (and even then some loans will have to be advised);

• The disclosure rules will change and the Initial Disclosure Document (IDD) will no longer be required and instead firms will have to verbally explain. The definitions of what advice is offered will also change;

• Firms will have to have an expected level of execution only sales and monitor them;

• To qualify for the new business lending rules the entire loan must be for business purposes and will have to be supported by a credible business plan;

• HNW mortgage customers will have to have at least £3 million of net assets or £300,000 p.a. of net income. This will have to be certified although for joint borrowers only one person needs to qualify and that includes any guarantor;

• All debt consolidation loans must have advice;

• Intermediaries will not be responsible for checking affordability (that will be the lenders job) but they will have to have anti-fraud measures in place. This means they will probably still need to think about evidencing income etc.;

• No credit repair bridging loans will be able to be offered unless there is a guaranteed mortgage offer for the exit. This may hit people who only have, say, one missed payment in the last six months but need a clean six month history to get mainstream credit. Bridging will no longer be an option.

The rules will come into play with effect from April 2014.

Regulation of more lending

The FSA are expected to consult early next year on the transfer of secured lending to the FSA (FCA as will be). This is also expected to take place in April 2014.

This will mean that loans currently subject to Consumer Credit Act (CCA) regulations - including exempt loans for HNW and predominantly for business purposes (PBP) - will become regulated. The existing exemptions for HNW and PBP will disappear bringing a wider chunk of bridging loans into regulation.

Intermediaries will need to be regulated to transact this type of business or have to pass it on to other authorised intermediaries.

The EU is still to reach agreement on the mortgage directive. Best guesses now are that buy-to-let (BTL) will now be caught under the regulations, although individual Member States may be able to choose to opt out of implementing all of the rules for BTL. 

If this happens it is likely to mean that firms will be required to be authorised to transact this type of business (even if there are reduced or minimal rules) or pass it on to other authorised intermediaries.

The BTL regulations would only impact loans to consumers (defined as acting outside their own business, trade or profession). This leaves many unanswered questions as to when a BTL landlord is acting as a business so the Treasury would have to give some guidance (although the Courts will be the final arbiter). Some believe it may be based on the number of BTL properties held as the easiest solution but this is rather arbitrary.

There is unlikely to be a vote before January 2013 and with a two year implementation period this is unlikely to impact prior to 2015.

What should I do?

• You should be thinking about what these changes mean to your business model;

• Will you need to be authorised or will you introduce (and who to)?

• If you are already authorised will you want to link up with intermediaries who are not authorised to take introductions and if so what are the risks?

• If you only arrange at the moment will you need to vary permissions to be able to advise? What will that mean for you in terms of gaining qualifications, training and competence?

You should start thinking about these issues now. Don’t wait until 2014 – it will be too late!


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