MMR: Government wants FSA to regulate mortgage book sales
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The government is looking to widen the Financial Service Authority’s remit to include the sale of mortgage books, in order to protect borrowers whose mortgages are being sold on.
The Mortgage Market Review alludes to a government consultation taking place soon which will address the best way to protect consumers when lenders sell on mortgage books.
The goverment has expressed a growing concern at the number of regulated mortgage books being sold by mortgage firms seeking to limit their losses or raise funds.
These sales are typically at a discount and have attracted hedge funds and private equity firms.
When a mortgage book is sold on the firms are not necessarily bound by the regulator’s rules, including principles of Treating Customers Fairly, if they are not deemed to be engaging in regulated activity.
There are concerns that firms acquiring mortgage books may seek to maximise margins by raising interest rates and charges to potentially unaffordable levels.
The paper argues that the lack of regulation may be driving these firms to buy up loan portfolios in the first place.
Under a chapter entitled ‘Other Matters for Discussion’, regulation of mortgage book sales appears top of the list.
The paper says: “The government proposes to consult on extending the scope of FSA regulation to ensure that the acquisition of mortgage books is a regulated activity to ensure borrowers continue to benefit from the protection provided by our regime.”
