MORTGAGE CREDIT DIRECTIVE: IMPLICATIONS FOR WEST ONE LOANS
MORTGAGE CREDIT DIRECTIVE: IMPLICATIONS FOR WEST ONE LOANS
- Some Unregulated loans becoming Regulated Mortgage Contracts
- 2nd charge loans on borrower’s property not predominantly for business becoming regulated
- ESIS to replace KFI for Mortgage Illustration
- New West One Loan approval process from 7th March
- Loan applications received prior to then must have a Mortgage Offer accepted by 18th March
- Consumer Buy-to-Let regulations also apply to bridging loans
As you are probably aware, the European Mortgage Credit Directive (MCD) comes into force across the UK mortgage market from 21st March 2016. This is a brief summary of changes for West One as a result. If you’d like to discuss any of these, please do contact us.
The Mortgage Credit Directive means that definitions of what constitutes a Regulated Mortgage Contract (RMC) will in some cases change. In general, definitions will become broader, meaning some cases which are currently Unregulated, will become RMCs. Most notable is moving 2nd charge loans on a customer’s dwelling, where the primary purpose is not for business. This now becomes an RMC on which West One can provide lending. The attached matrix provides further details on these points.
Mortgage Credit Directive requirements and their effects on West One’s business mean we need to make changes to our lending process: some fundamental and some minor. The changes are:
- Mortgage Illustration (ESIS) is issued to customers in place of KFI
- Somewhat comparable to current KFI as it details loan terms, fees and charges
- Process of issuing mortgage offers will change:
- West One will issue a Conditional Offer, providing details of conditions required to make the offer binding
- Once conditions are met, West One will issue a Binding Offer Letter confirming that offer terms are now binding on West One for a period of 10 days
- The customer then has a 7 day reflection period, to decide whether they want to accept the offer terms and proceed with the loan
- At any stage after the issue of a binding offer letter, the customer can sign and return the offer to accept the terms. Doing so will waive the 7 day reflection period
- Consumer Buy-to-Let (CBTL Mortgages): certain Buy-to-Let Mortgages will fall under regulated processes, including loans where:
- The individual is borrowing on a property that has been occupied in the past by the borrower or a related person, or where there is an intention to live there in future
- And the borrower does not or has not owned a buy-to-let property in the past
In order to facilitate the changeover to the Mortgage Credit Directive, West One will implement these changes with effect from 7thMarch. Provisions of the Mortgage Credit Directive do not allow for a transition period. As a result, all current cases that are with West One will have to have an issued and accepted Mortgage Offer or Facility Letter, on or before 3pm on 18th March 2016; that is, signed acceptance of agreement needs to be received by West One.
After this date, any RMC case, as defined under Mortgage Credit Directive, that has not completed will need to be re-processed in accordance with the Mortgage Credit Directive, which will include the correct provision of advice and all necessary documentation being issued as set out above. In addition, any case which does not complete by 18th March may fall within the Mortgage Credit Directive definitions. This may mean that an Unregulated deal becomes Regulated, depending on the case.
