Unit 3:3 Mortgage Regulation Flashcards
1
Q
First Charge Mortgage
A
- the main loan on your property
- gets paid first if your home is sold after missed payments
- registered with land registry
- has priority over any other loans on your home
- what most people use to buy a house
- lender can sell your home if you stop paying
- better rates than second mortgages
- usually your biggest property loan
2
Q
Second Charge Mortgage
A
- an extra loan taken against your home’s equity
- gets paid second if your home is repossessed
- you keep your first mortgage and add this on top
- creates a second monthly payment
- uses the value in your home that you’ve built up
- doesn’t replace or change your first mortgage
- usually higher interest rates than first mortgages
- useful when you don’t want to touch your main mortgage
- common for home improvements or debt consolidation
3
Q
Mortgages Regulated by FCA
A
- first charge mortgages
- lifetime and second charge-charge mortgages
- bridging loans
- home reversion plans
- home purchase plans (Islamic mortgage)
4
Q
Brexit and The MCD
A
- EU rules from 2016 for all mortgage types
- covers equity release, home purchase plans, retirement interest-only
- brought CBTLs, bridging loans, second charges under MCOB
- regulation status decided at point of sale
- can’t retroactively regulate unregulated mortgages
5
Q
Back Book Loans
A
- Second charge mortgages taken out before March 21, 2016
- Are now subject to MCOB (Mortgage Conduct of Business) rules
- But only if they meet the criteria for what would be considered regulated second charges under the post-March 21, 2016 rules
In simpler terms:
When the MCD (Mortgage Credit Directive) came into effect on March 21, 2016, it brought second charge mortgages under MCOB regulation. This change applied not just to new loans but also retroactively to existing second charge mortgages (back book loans) that would have qualified as regulated mortgages under the new criteria.
6
Q
Acts of Parliament
A
- regulatory bills start with parliament, when a bill is approved by parliament in a vote in the house of commons
7
Q
Regulated Mortgage Contracts
A
- Lender provides credit to an individual or to the trustees (the borrower)
- The borrowers obligation to repay is secured by a mortgage on land in the UK, where 40% of the land is used to live in
8
Q
Lifetime Mortgage
A
- equity release option for older homeowners
- no repayments needed while you live there
- interest adds up over time
- repaid when you die or enter care
- lets you use home value without selling
9
Q
Home Reversion
A
- Equity release option for older homeowners
- Sell all or part of home to provider for lump sum or regular payments
- Stay in home rent-free or pay nominal rent
- No repayments, but you no longer fully own the home
- Provider takes their share when you die or move into care
10
Q
MCD Exempt Lifetime Mortgage
A
- Lifetime mortgages are regulated separately from other MCD loans
- They’re mainly for older homeowners and come with special consumer protections due to their unique features and the vulnerability of the borrowers.
- FCA regulated
11
Q
Retirement Interest Only Mortgages
A
- are FCA regulated
12
Q
Islamic Home Finance
A
- sharia compliant finance, muslims cant pay interest
- typically know as home purchase plans
13
Q
Consumer Credit
A
- The Consumer Protection (Amendment) Regulation 2014.
- All consumer credit falls under this regulation
14
Q
Financial Services and Markets Act 2023
A
- Aim is to abolish all EU laws that affect financial services and to rename EU laws still in place after 2023 as ‘assimilated laws’
15
Q
Who does the FCA define as a credit-impaired customer?
A
- Arrears on credit/mortgage in the last 2 years
- CCJ registered in the last 3 years
- Bankruptcy or IVA in the last 3 years
- Debt Relief Order (DRO) or Debt Management Plan (DMP)
- Property repossession in the last 6 years
