The FSA proposals put forward in CP146 outline the scope of the new mortgage regime.
A mortgage will be regulated if the borrower is an individual or trustee; the lender takes a first legal charge over property in the UK and the property is at least 40% occupied by the borrower or by a member of his immediate family. The regime covers lending for home improvements or for debt consolidation, business lending to sole traders or partnerships in England and Wales, secured overdrafts and secured credit cards, and bridging loans.
The mortgage definition does not cover buy-to-let mortgages (unless the tenant is a member of the borrower's immediate family), second charge loans or loans to limited companies.
Regulated activities are mortgage lending; mortgage administration; advising on mortgages, and arranging mortgages. Where the regulated activity is carried on from an establishment in the United Kingdom, the firm will need to be authorised and comply with the mortgage rules if the consumer is normally resident in the UK or another European Economic Area (EEA) state.
Exclusions from the regime include introducers; any person acting as a trustee, nominee or representative who does not receive additional remuneration for these services; advice given in a newspaper or other periodical, subject to certain conditions; and any solicitor, accountant or actuary who carries on the activities of advising or arranging mortgages in the course of their profession. In addition, local authorities, registered social landlords in England and Wales, housing associations registered by Scottish Homes, and the Housing Corporation, Scottish Homes and the Northern Ireland Housing Executive, are all exempt.
The FSA has also published draft guidance to help firms understand the legislative scope, because it may not be clear to all businesses whether an activity is within FSA scope or outside the regulatory perimeter.