Buy to Let Mortgages

There are a number of missives shooting around the industry at the moment about Buy to let mortgages and the Consumer Credit Act. The latest I have seen is the one by BM Solutions which states something along the lines :

Credit Brokering refers to Buy To Let Mortgages that are not regulated under MCOB. 

Now that is interesting isn't it because the FCA have told us and as at five minutes ago on their web site continue to tell us :

The Government’s overall approach has been to keep the scope of consumer credit regulation broadly the same. There are no significant differences in the types of loan agreement that are exempt from being 'regulated agreements'.

But there will be some differences in the activities that are regulated. 

I think that the BTL mortgage market would be  termed as significant if it had changed.

The FCA then goes on to explain about Credit Brokering:-

The previous OFT regime, under the Consumer Credit Act 1974 (CCA), had two separate activities of:

• credit brokerage (introducing individuals to businesses that are lenders or other credit brokers)

• credit intermediation (certain other activities to arrange a loan)

To make regulation simpler for firms and consumers, the new regime brings together credit brokerage and credit intermediation in a single regulated 'credit broking' activity for which businesses will need to be authorised.

Now I could be wrong but I think that some of us are losing sight of the fact that the Consumer Credit Act is what we are talking about and that there are certain exemptions to the Act involving certain transactions on land. Along with regulated first mortgages, Buy to let mortgages are still one of those exclusions unless I have missed something important. So when we refer to Credit Broking as effecting an introduction of an individual to a lender  that results in a credit agreement , we have to consider the legal context. Of course, the Consumer Credit Act stipulates that only certain lenders can make use of this exclusion but I would have thought that all mortgage lenders would be  able to do so.

Furthermore we are told that under the Mortgage Credit Directive coming in in 2016, certain Buy to Lets will fall under regulation ( 'accidental landlords'). You cannot have dual regulation so something is wrong surely.

Finally, if we are looking at Buy to Lets falling under Consumer Credit Act, then presumably the same paperwork will be  produced as existing second charge mortgages. is that going to  happen - I don't think so because it would have had to be  in place already... cooling off periods and the lot.

However, there can be no doubt about it, if you want to refer BTL mortgages to BM Solutions you will need Credit Brokerage. If you are a client of mine, you will have already been told that for a number of reasons ( not including this one however).

No, in this period of festive cheer, this looks like a lot of administrative humbug, I respectfully suggest.

Will I have to eat my proverbial hat in the new year.?... Let's wait and see!

Consumer Credit VOP

For those of you who are currently going through the pain of the Variation Off Permission for Consumer Credit, here is a little thought to add to it.

There are exemptions on debt-counselling when it relates to the effecting of a regulated home finance contract and so technically you might not need to seek this part of the permission. However, the exemption does not apply to BTL mortgages at all, or to second charges until 21st March 2016 when the Mortgage Credit Directive takes effect.

I also have a concern regarding the wording of the exemption in those cases where you are unable to recommend a regulated mortgage to the client because they are ineligible with lenders yet your firm has undertaken some form of debt counselling... e.g "I recommend that you consolidate your debts into a single loan but I cannot recommend a mortgage to you." ( This is one of the examples in PERG 17)

However, if you apply for Debt Counselling you can possibly expect the full treatment from the FCA because it gives you the right to do all sorts of things. You don't necessarily want to have to explain your procedures and controls and so on for undertaking activities that you will never use and so the best way to deal with it is probably by including a non-standard limitation on your permission under debt counselling.

Just a thought in this run up to the festive season but if this remains unintelligible, please feel free to contact me.