Topic 21 Conduct Of Business Requirements Part 2 Flashcards
The FCA’S rules on Mortgage Advice are found where?
Mortgage & Home Finance: Conduct of Business (MCOB)
The implication of the EU Mortgage Credit Directive (MCD) meant what for Mortgage & Home Finance: Conduct of Business (MCOB)
It’s scope was extended to second charge properties in 2016
What is the below in relation to Mortgage & Home Finance: Conduct of Business (MCOB)
- Lender provides credit to an individual or trustees (borrower)
- Contract provides obligation of the borrow to repay to be secured on land
- At least 40% of the land used is connected with a dwelling
What a regulated mortgage subject to MCOB must do
What new category of regulation did the EU’s Mortgage Credit Directive (MCD) introduce?
Consumer Buy to Let (CBTL)
Consumer Buy to Let (CBTL) are subject to the rules of Mortgage & Home Finance: Conduct of Business (MCOB) or Mortgage Credit Directive (MCD)?
Mortgage Credit Directive (MCD)
What are the rules the government has in regards to Consumer Buy to Let (CBTL)
- Pre-Contract Disclosure
- Assessing Credit Worthiness
- Arrears Management
What is a Consumer Buy to Let (CBTL)?
A mortgage that has been entered into but it’s purpose is not for business purposes
Why are CBTL’s regulated & BTL not?
CBTL’S Mortgagor’s are deemed to have less expertise a BTL mortgagor
What MCOB provision is this?
Explains the scope of the rules to whom they apply & for what type of mortgage
MCOB 1: Application & Purpose
What MCOB provision is this?
- Correct use of terminology
- Requirement for communications with customers to be “clear, fair & not misleading”
- Rules about payments of fees/commission & accessibility of records for inspection by the FCA
MCOB 2: Conduct of Business Standards: General
What MCOB provision is this?
- Remuneration
- Tying of products (making a mortgage conditional on the purchase of other products)
- Foreign Currency Loans
- Early Repayments
MCOB 2A: Mortgage Credit Directive
What MCOB provision is this?
Distinguishes between real time & non real time promotions
- Unsolicited real time promotions are not permitted
- Real time promotions must include name & contact details of the firm. Clear & not misleading
- Must state your home will be repossessed if you do not keep up repayments of your mortgage
- Records of non-real time promotions must be retained for 1 year after last use
MCOB 3A: Financial Promotions & communications with customers
What MCOB provision is this?
Specifies requirements relating to information that must be provided to customers for customers who make mortgage advances regulated under the Mortgage Credit Directive
MCOB 3B: (Mortgage Credit Directive) MCD General Information
What MCOB provision is this?
- Independent advisor are not required to access all products from all providers but it must be representative of the market
- Mortgage recommendations must be suitable for the client
- Special requirements if the mortgage is to repay a debt
MCOB 4 & 4: Advertising & Selling Standards
What are these in relation to MCOB 4 & 4: Advertising & Selling Standards
- Name & contact details
- Who’s mortgages are offered
- Details of limitations in the service
- Details of any fees payable for mortgage advice
- Firm’s FCA registration details
- How to complain
- Details of the compensation scheme
What is on a Initial Disclosure Document (IDD)
What MCOB provision is this?
Information that must be provided before a recommendation is made and before an application is submitted to a lender
- Annual Percentage Rate of charge (APRC) which shows interest rate with fees added
- The amount of monthly installments
- Amount by which instalments would increase for each 1% of interest rates
MCOB 5 & 5A: Pre Application Disclosure
How must information for MCOB 5 & 5A: Pre application Disclosure be presented?
Via a European Standardised Information Sheet (ESIS)
What MCOB provision is this?
Lender must provide a detailed offer document. Offer is binding on lender can be made conditional on confirmation of certain details
- State how long the offer is valid
- Point out no right of withdrawal after the mortgage has drawdown & completed
- Include tariff of charges
MCOB 6 & 6A: Disclosure at the offer stage
At the disclosure at the offer stage how long is the period of reflection
At least 7 days
What MCOB provision is this?
Before the first payment is made the lender must confirm
- Details amounts, dates & methods of payment
- Details of any related products such as insurance
- (Interest only) borrow’s responsibility to ensure a repayment vehicle is in place
- what a customer should do if they fall into arrears
MCOB 7 & 7A: Disclosure at the start of contract & after sale
What should the annual statements show according to MCOB 7 & 7A: Disclosure at the start of contract & after sale?
- Amount owed & remaining term
- What type of mortgage it is
- (Interest Only) check the performance of the repayment vehicle
- Interest, fees or other payments since the last statement
- Any changes to tariffs since last statement
If a customer was to change interest rate or a lenders variable rate changed what must the lender do?
Contact the customer to inform them of changes
What MCOB provision is this?
FCA’s training & competence rules anyone giving advice on equity release must hold a specialist qualification
MCOB 8 & 9 Equity Release - advising & selling standards and products disclosure
What MCOB provision is this?
Annual Percentage Rate (APR)
MCOB 10
What MCOB provision is this?
Annual Percentage Rate of charge
MCOB 10A
What MCOB provision is this?
Lender must have a responsible lending policy & must have taken into consideration customers ability to repay the mortgage
MCOB 11 & 11A Responsible Lending
What MCOB provision is this?
- Excessive charges are not permitted. ERC’s must be approximation of costs incurred by the lenders.
- Arrears charges must be an approximation of additional administration as a result of borrower being in arrears
MCOB 12: Charges
What MCOB provision is this?
- Trying to reach an agreement on how to repay the arrears, taking into account the borrowers circumstances
- Liaising with third party sources of advice
- Not putting unreasonable pressure on customers in arrears
- Repossessing a property only when other reasonable measures have failed
- Only applying arrears charges that are a reflection of the costs of the work involved in dealing with the arrears
MCOB 13: Arrears & Repossessions
Customers in arrears must be given the following information within how many days of the lender being aware of the arrears?
- Money Helper information sheet “Problems with paying for your mortgage”
- Missed payments & total of arrears including any charges incurred
- Outstanding debt
- Any further charges that may be occurred until arrears are cleared
15 working days
What are the 2 levels of service that can be provided to mortgage customers according to MCOB?
- Advice
- Execution Only
What are the only situations that Execution Only can be used in the respect of a mortgage according to MCOB?
- Business borrowing
- High net worth individuals
- Mortgage professionals
The FCA defines a vulnerable customer on the basis of the financial arrangements they are considering they are?
- People buy a property using statutory right to buy
- Those entering a sale & rent back arrangement
- Equity Release applicants