Topic 8: Regulation and the buying process Flashcards
What is a financial promotion?
An inducement or invitation (ie advertisement) to take out an investment product or service, including mortgages.
What is a Non Real Time Financial Promotion?
A financial promotion that doesn’t involve real-time interactive dialogue, such as a letter, an email or an advert.
What is a real time financial promotion?
A financial promotion happening through interactive real-time dialogue, such as a telephone conversation or face-to-face conversation.
Explain Initial Disclosure (MCOB 4& 4A)?
The information about a lender that it must give to a prospective purchaser before a mortgage is arranged. This information includes the type of service and range of products offered. If the mortgage is arranged through an intermediary, the intermediary must provide the disclosure information.
Explain Pre-application disclosure (MCOB 5& 5A)?
Information that must be provided to the customer before they complete a mortgage application.
What is Key Features Illustration (KFI)?
Document containing information that must be provided to a customer as part of the pre-application requirements for a regulated mortgage. The information must follow a prescribed format.
What is European Standardised Information Sheet (ESIS)?
Document containing information that must be provided to a customer as part of the pre-application requirements for an MCD regulated mortgage. The information must follow a prescribed format.
What is Execution Only?
Where a customer asks for a specific product without seeking or being given any advice or a recommendation by the adviser. Mortgage firms can’t offer execution only as a standard service, but can provide it in certain situation. At other times, customers can reject the recommendation given and then proceed on an execution-only basis.
Explain Disclosure at the offer stage (MCOB 6 & 6A)?
Information that must be provided to the customer as part of the mortgage offer.
What is an Offer Document?
The formal offer of a mortgage from the lender, containing key information about the mortgage and the terms of the offer. For a regulated mortgage the document must contain a KFI. There is no prescribed content for an MCD regulated mortgage offer document, but similar information must be included.
What is Annual Percentage Rate (APR)?
A calculation designed to show the true cost of borrowing for regulated mortgages. It assumes the rate of interest at the start of the mortgage will apply throughout the term, considers how often interest is calculated and includes costs associated with arranging the mortgage. The APR is usually higher than the headline rate.
What is Annual Percentage rate of charge (APRC)?
A calculation designed to show the true cost of borrowing for MCD regulated mortgages. The calculation is slightly different from the APR but the principle is the same.
What is a Binding offer?
An MCD mortgage offer is binding on the lender. The lender can only withdraw the offer if there has been a material change to the applicant’s circumstances or the condition of the property. The binding offer does not apply to variations to an existing MCD mortgage.
What is a Reflection period?
A seven-day period from receipt of the lender’s binding offer that gives the borrower time to consider the offer and compare it with other offers. The offer remains binding on the lender during the reflection period, and the borrower can accept or decline it at any time within the seven-day period.
What is Disclosure at the start of the contract (MCOB 7)?
Information that must be provided to the borrower before the first payment on the new mortgage or further advance. It covers specified information required at the start of the contract and information required during the mortgage term.
