Regulation is a hot topic in the buy-to-let industry of late, ahead of the EU’s Mortgage Credit Directive next spring, which will see some areas of the industry come under the FCA’s watch.
Last week, the Council of Mortgage Lenders, a body that has been vocal about its opposition to buy-to-let regulation, published a statement of practice for buy-to-let lenders in an attempt to advise its members on how they should be operating in order to keep the market working well.
The main points of the statement include ensuring that any advertising of buy-to-let products is not misleading, adopting a written policy outlining the factors that will be taken into account when assessing a customer’s affordability and a strategy for handling arrears and adhering to a documented complaints policy. The CML also wants lenders to have a written policy for how they will try to prevent, identify and resolve fraudulent cases.
One has to give credit here to the CML. It is clear that the lender trade body understands the disruption that regulation could cause. As it pointed out last year when the Treasury’s consultation was first published, the fact that the proposed regulation is fragmented could potentially cause problems for lenders, brokers and consumers. It will be difficult to understand which loans should be regulated and which should not and that could cause delays. It may also hold back what is clearly an extremely buoyant market – one that is vital to the economy.
In publishing its statement of practice, the CML is demonstrating the industry’s ability to regulate itself. Those of us operating in buy-to-let – from lenders to brokers – want the sector to prosper. We want it to continue growing and we know the only way that will happen is if it is run properly and borrowers are treated fairly.
My only criticism of this statement of practice is that, by and large, it is stating the obvious. I do not know of any lenders that do not think carefully about their advertising – particularly in the post-credit crunch world – to ensure it is fair and not misleading.
All of the buy-to-let lenders we deal with will consider affordability when offering a loan (albeit in a different way from residential mortgages because buy-to-let is a very different product) and I am pretty sure that trying to identify and prevent fraud is standard procedure for most. Sure, there will always be the odd fraudulent case that slips through the net but that is usually not as a result of a lack of trying on the lender’s part.
It is good to see the CML supporting its members by speaking out on the topic of buy-to-let regulation but I hope it – and the wider industry – realises its guidance is already being followed as best practice.