The FSA has published its consultation on proposals for regulating mortgage sales.
The consultation closes on November 11 2002. The paper is the first in a series of consultations, which will see mortgage sales regulated from around mid-2004.
Sarah Wilson, director of the high street firms division, says: “For many consumers, taking out a mortgage is one of the most significant financial commitments they will make in their lifetime.
“We want to make sure that consumers get clear comparable information on mortgages and that, where they get advice, they are recommended a suitable mortgage.
“We aim to introduce a regime that achieves this goal in a proportionate, cost-effective fashion.”
The FSA regime will regulate mortgage lending, mortgage administration, advising on a regulated mortgage contract and arranging a regulated mortgage contract.
Firms that will need authorisation include banks, building societies, specialist lenders and mortgage intermediaries.
Mortgages to be covered include loans that are taken out by an individual or trustee, and are a first legal charge on the borrower's property. This property must be located in the UK and must be at least 40% occupied by the borrower or immediate family.
As well as mortgages for property purchase, the regime will cover other products where the security is a first charge over the borrower's residential property, including home improvement loans, debt consolidation loans, lifetime mortgages and secured credit cards.
The regime will not cover second charge loans, most buy-to-let arrangements and loans to companies.
The key areas for regulation are:
Requirements on firms relating to the sales process whether they give advice or information – for example:
The FSA has also published a feedback statement on CP98 which contains near-final rules on some post-sale issues and a consumer research report on mortgages.
Visit the FSA website at www.fsa.gov.uk for more information.