MARSDEN INTERMEDIARIES
MARSDEN BUILDING SOCIETY
BROKER FAQ
THE EUROPEAN UNION MORTGAGE CREDIT DIRECTIVE (MCD)
The MCD provides an EU-wide framework for conduct rules for
mortgage activities. The directive will ensure a consistently high
level of consumer protection. All lenders and intermediaries must
be compliant by 21 March 2016.
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MARSDEN INTERMEDIARIES
OVERVIEW OF THE MORTGAGE CREDIT DIRECTIVE
The European Commission proposed the directive on credit agreements for consumers relating to
residential immovable property, more commonly referred to as the MCD
The key areas in which the MCD places requirements on the mortgage market aiming to ensure that:
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mortgage firms act fairly and professionally, and that their staff have an appropriate level of
knowledge and competence
advertising of products is fair and not misleading, with certain standard information included
where specific rates are being quoted
certain information is provided to the consumer ahead of a contract being concluded
lenders conduct an affordability test, looking at customers’ income and expenditure, to
determine whether they can afford the mortgage loan
minimum standards are followed where advice is provided to consumers
lenders put in place additional consumer safeguards where loans are in a foreign currency,
to protect the customer against exchange rate risk
consumers are given a right to be able to exit a mortgage before it reaches the end of the
term
lenders exercise reasonable forbearance to customers in payment difficulties before
initiating repossession proceedings
The UK is required to implement the MCD requirements by 21 March 2016, in order to meet its
Treaty obligations. This requires the UK government to make changes to the legislation that enables
mortgage regulation in order to meet the requirements set out in the MCD.
The Society has been working as a team to unpick the Directive and apply it to our process. This
guide details how it affects the main areas and what we are putting in place to address the changes.
Please take the time to read through the guide for more information.
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What’s changing?...
KFI+/ESIS
The KFI will be replaced with the
European Standardisation Information
Sheet (ESIS), more commonly referred
to as the Mortgage Illustration. Lenders
are allowed to take a phased approach
to implementation of the Mortgage
Illustration, with the option to move to
a KFI+ which is an enhanced version of
the current KFI until March 2019.
Q WILL THE MARSDEN MOVE TO KFI+ OR ESIS?
We will be moving to KFI+ from early January whilst we
finalise the ESIS.
Q WHAT ARE THE CHANGES TO THE NEW KFI+?
The information in the mortgage illustration will be similar to
the KFI. For all new residential lending, it will also include two
Annual Percentage Rates of Charge (APRCs). The first APRC is
based on the current interest rate, plus reversionary rate,
unless the product is fixed for the duration of the loan; the
second is based on the highest borrowing rate over the
previous 20 years and can either be based on a relevant
external reference rate or the benchmark rate as set by the
FCA.
Q HOW WILL MARSDEN HANDLE PIPELINE BUSINESS?
Implementation of MCD should have no material impact on
pipeline business. We are implementing MCD changes in early
January which will mean your clients will receive a compliant
MCD mortgage offer which allows completion to take place.
For any existing cases where a non-MCD compliant offer has
been issued the Society will be arranging to issue a compliant
MCD-offer during early March to ensure their mortgage can
complete.
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Mortgage Offers
Under MCD Lenders will need to make
an offer by which it is bound for a
period of reflection.
Q WHAT IS A REFLECTION PERIOD AND WILL THE MARSDEN
OFFER THIS TO CLIENTS?
All Lenders must offer clients a period of reflection when the
mortgage offer has been issued. The period of reflection allows
customers to consider the information provided and to make up
their mind prior to proceeding with the contract. The Society’s
reflection period is 10 days from the date the mortgage offer is
issued.
During the reflection period, the broker, the conveyancer or the
Society may make contact with the client. However, any contact
made must not result in pressurising the client to complete the
loan before they have decided it is right for them to proceed with
the mortgage.
Q CAN A CLIENT WAIVE THEIR RIGHT TO THE REFLECTION
PERIOD?
Yes, the reflection period is not aimed at preventing the contract
from completing if the client chooses to do so. When we issue
our mortgage offer, the offer will include an explanation of the
reflection period, the timing of the reflection period and how the
reflection period can end.
Should your client wish to accept the offer during the reflection
period then they simply sign and return the mortgage offer
confirming that they are waiving their right to the reflection
period. Alternatively, should your client do nothing during the
reflection period and there is more than 10 days before
completion of the mortgage is due to take place, it will come to
an end when the 10 days has elapsed.
Q CAN THE CONVEYANCER WAIVE THE CUSTOMERS RIGHT TO
THE REFLECTION PERIOD?
We require a signed mortgage offer from our customers prior to
completing on a mortgage. We therefore do not anticipate a
need for the conveyancer having to waive a customer’s right to a
reflection period.
Q CAN A BINDING OFFER BE WITHDRAWN?
It is not common practice for a Lender to withdraw an offer and
MCD will not affect this. We have the right to withdraw a
mortgage offer for reasons such as;
• There has been a material change to our customers
circumstances
• Where our customer has knowingly given incorrect
information
• There is fraud or a materially adverse valuation
• There are issues with the legal title of the property
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Consumer Buy to Let (CBTL)
As part of the new regulations, some
clients will be categorised as Consumer
Buy to Let (CBTL). CBTL will apply to
‘accidental landlords’ and they will be
provided with additional complaints
and compensation protection.’
Q WHAT IS A CONSUMER BUY TO LET?
Our definition of a consumer buy to let loan is where your client is
taking out a mortgage to finance a property which will be rented
out:
• Where they or a related person lives or have previously lived in
the property
• Where the property has been inherited
• Where the customer is not acting for a business purpose
Let to buy customers will be caught by the CBTL rules (the
property they are looking to rent out has been lived in by them or
a related person and they hold no other rental properties).
Q WILL MARSDEN ACCEPT CBTL APPLICATIONS?
Yes, we will offer CBTL mortgages; however, we can only accept
applications from brokers who are authorised by the FCA to deal
with CBTL mortgages. Further information can be found on the
FCA website
[https://www.gov.uk/government/consultations/implementationof-the-eu-mortgage-credit-directive/implementation-of-the-eumortgage-credit-directive] or please discuss with your own
compliance department.
Q HOW WILL MARSDEN KNOW IF MY CLIENT IS APPLYING FOR A
CBTL MORTGAGE?
Your clients will be asked to answer additional questions about
their intentions and circumstances during the AIP and application
process. This will identify if the mortgage is a CBTL and your
client will qualify for additional regulatory protections.
Applications will continue to be underwritten in the same way,
MCD will not affect this.
Q MARSDEN OFFER CBTL AND BTL (INVESTMENT PROPERTY
LOANS), DO YOU OFFER RESIDENTIAL BUY TO LETS?
No, we do not currently offer loans that are regulated as a
residential mortgage under Mortgage Conduct of Business Rules
(MCOB). This lending allows a related person to reside in the
property which is subject to a rental agreement.
Q CAN A CBTL STATUS CHANGE?
The status of the loan is set at completion, assuming the
mortgage completes after 21 March 2016 then the mortgage is a
CBTL. A re-mortgage or other change, such as porting, which
creates a new contract, could result in a new assessment of the
regulated status. For instance if your client has since purchased a
further BTL then creates a change to the original CBTL which
results in a new contract will transfer the status of the original
CBTL to a BTL.
MARSDEN INTERMEDIARIES
Second Charge Loans
The MCD applies equally to first and
second charge mortgages, therefore
second charge mortgage regulation will
move from the consumer credit regime
into our mortgage regime as part of
implementing the MCD.
Q DO MARSDEN OFFER SECOND CHARGE LOANS?
Foreign Currency Lending (FCL)
The definition of this has been changed
by the MCD. FCL’s now include clients
who would rely on any non-sterling
income/asset to repay their mortgage.
DO MARSDEN OFFER FCL MORTGAGES?
No, we do not offer second charge loans. However, it is
appropriate that second charge lending falls within the same
regulatory framework.
Yes, we do offer FCL mortgages. However, distribution is via
exclusive partnerships only. For more information, please get in
touch with Marsden’s Intermediary Team.
Get in touch…
(01282) 440583*
Authorised by the Prudential Regulation Authority
and regulated by the Financial Conduct Authority and
the Prudential Regulation Authority. Registered in
the Financial Services Register under no: 206050. A
member of the Financial Services Compensation
Scheme and the Financial Ombudsman Service. 14-16
Lines are open Mon-Fri 8:30am – 5.00pm, Sat 9:00am
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monitored.
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Principal Office
6-20 Russell Street Nelson BB9 7NJ
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