CML “agnostic” over BTL regulation

25 November 2009 | By Natalie Thomas

The government revealed this morning that is was backing plans for the expansion of the FSA’s remit to include buy-to-let and second charge mortgages. But the CML says it is unclear whether the Treasury’s main rationale for the proposed extension to scope relates to market risk or consumer protection.

It argues that if the aim is to protect amateur property investors from poor property investment decisions, then regulating the mortgage process - as opposed to the sale process - will not necessarily address this it believes.

The CML has seen little evidence of consumer detriment to buy-to-let mortgage borrowers arising out of their mortgage borrowing, so the case for extending regulatory scope here is not clear cut.

Michael Coogan, director general of the CML, says: “We will now study the Treasury consultation paper in detail, in parallel with the FSA’s consultation on potential changes arising from the Mortgage Market Review.

“2010 is clearly going to be a year of regulatory change for mortgage lenders - but it’s important that change should have a clear rationale and a clear set of outcomes, and not be implemented simply for its own sake as a reaction to past events that conduct of business regulation would not have prevented.”

The CML supports an extension of FSA regulatory scope to second-charge lending and broadly supports the rationale for extending FSA regulatory scope to the acquirers of mortgage portfolios when they are sold on by the originator.

But says there are bound to be technical issues to be ironed out in this area, and it is vital that such regulation avoids creating other knock-on negative effects, the principle is correct in and plugs an existing regulatory gap.
 

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