As summarised in detail in a Feature in Edition 2 of this Briefing, UK mortgage lenders and intermediaries must comply with an entirely new set of regulatory rules under the Mortgage Market Review (MMR) from 26 April 2014. The MMR Final Rules were set out in FSA Policy Statement 12/16 and (with the Financial Conduct Authority (FCA) having assumed the Financial Services Authority's previous responsibility for the MMR) are (now) contained in the FCA's Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB) and the Prudential Sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU). The new rules focus on responsible lending and affordability assessments, enhanced record-keeping, sales restrictions, information provision and arrears management. Enhanced prudential requirements will also apply to non-bank mortgage lenders which will be subject to risk-based capital requirements and liquidity risk management controls for the first time. Mortgage originators will need to ensure compliance with the MMR Final Rules when securitising mortgages subject to the new regime going forward. This will be particularly important for those non-bank lenders who are being brought into the mortgage regulatory regime for the first time under the MMR. In related European developments, the final text of the EU Directive on Mortgage Credit has now been published in the Official Journal of the EU. The final text notes that Member States have until 21 March 2016 in which to transpose the Directive into national law and must apply their implementing measures from that date. The Directive establishes an authorisation, registration and supervision framework for mortgage credit providers and intermediaries (whether they are banks or not), sets high conduct of business standards, requires the provision of key, detailed, pre- and post-sale information to borrowers, and establishes requirements for responsible lending and borrowing. It is expected that the UK will already be largely compliant with the Directive's provisions as a result of the introduction of the MMR Final Rules.
MMR Final Rules: Policy Statement 12/16