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Background

Although the mortgage market has worked well for many people, it has been a cause of major economic distress for others and the FSA's existing regulatory framework has proved to be ineffective in constraining in particular high-risk lending and borrowing.

In October 2009 the FSA's announced its Mortgage Market Review which sets out the case for altering their current regulatory approach to the mortgage market and looked specifically at whether there is a case to restrict access to high-risk lending and borrowing while ensuring consumers still have access to mortgage products

The aim of the review is to implement changes to create a mortgage market that works better for consumers and that is sustainable for all participants. The review has been built on a more intensive overall approach to supervision of firms and examines how supervision can deal robustly with those firms who adopt high-risk strategies, by being prepared to intervene where business models and strategies create undue risks for firms, consumers and the financial system generally. For the first time, the proposals include provision for regulating and banning specific product charges and a requirement for lenders to assess affordability for all mortgages.

Regulation timeline

  • October 2009 Mortgage Market Review (MMR) Discussion Paper (DP) 09/3, which set out broad concerns about the UK mortgage market and invited debate on a suggested package of reforms to address them.
  • January 2010 The first MMR Consultation Paper (CP) 10/2 signalled our intention to bring all those who advise on or sell mortgage contracts into the Approved Persons regime, to reduce mortgage fraud
  • July 2010 The CP on responsible lending (CP10/16) which focused on the regulatory obligations of lenders and suggested the changes we thought necessary to deliver a more responsible approach to lending – and borrowing – in future.
  • November 2010 The CP on distribution and disclosure (CP10/28), focused on enhancing the mortgage sales process, the role of intermediaries and improving disclosure of information for consumers
  • December 2011 CP11/31 entitled 'Mortgage Market Review: Proposed package of reforms', pulls everything together and consulting further on the entire package of MMR proposals..
  • 30 March 2012 closing date on feedback and comments on CP11/31
  • Summer 2012 feedback statement on CP11/31 and final rules 
  • Summer 2013 implementation

The latest MMR Consultation Paper (CP11/31) pulls together all the feedback from the previous MMR papers into a package of MMR proposals and seeks fresh feedback by 30th March. The proposals include fresh proposals on subjects already consulted on last year such as 'responsible lending' and 'distribution and disclosure'; some new proposals that the FSA is consulting on for the first time for example interest only; the draft rules and an aggregate cost benefit analysis. This is a wide ranging paper, so we have focused on the proposals that most affect mortgage intermediaries.

Follow the links to read 1-page guides the full proposals for:

  • Distribution and disclosure: Proposals that will affect the mortgage sales process, the role of intermediaries and disclosure of information for consumers.
  • Responsible lending: Proposals that will affect lending decisions and interest-only mortgages
  • Niche markets: Proposals that will affect equity release, home purchase plans, sale and rent back, bridging finance and high net worth (HNW) and business lending

Have your say and a chance to win an Ipad

The FSA has agreed to take collective intermediary feedback via www.tcfinfo.co.uk as part of their consultation process. Between now and the end of March, we will will run three short questionnaires to get your feedback on how these proposals will affect intermediaries. So take a moment to and use our quick and easy questionnaires to have your say and encourage any colleages to take part as well - you may win an Ipad! Your feedback is important is vital to developing regulation which works - make sure your voice is heard. Use the links below to give your feedback:

Distribution and disclosure survey
Responsibile lending survey
Niche markets survey

FSA links

Latest MMR Consultation Paper CP11/31
Online response form to be completed by 30th March 2012