Mortgage sales were regulated on a voluntary basis by the Mortgage Code Compliance Board (MCCB) until midnight on Saturday, October 30, 2004. Both lenders and brokers had promised to follow this code, which has now been shut down.
This changed on October 31, 2004, when a big part of the mortgage market became regulated by the government. At this point, the Financial Services Authority took over regulation (FSA).
The FSA's job is to keep an eye on how the UK's financial services industry is run. The FSA is not a part of the government. Instead, it is a limited company. The Banking Act of 1987 gives it legal powers. The treasury is in charge of putting people on the FSA's board, which makes policy decisions.
The FSA must approve all mortgage brokers, either directly or through an approved network or packager. You can use the register on fsa.gov.uk to see if a company is authorised.
What are the Financial Services Authority's main legal goals when it comes to mortgages?
The government has given the FSA a number of legal goals, such as:
# Keeping faith in the mortgage system in the UK.
# Getting people to understand how mortgages work.
# Making sure that consumers have enough protection.
# Making it harder for people to steal money.
What are the main parts of the Financial Services Authority's rules about mortgages?
Regulations set up by the FSA are required by law, and anyone or any organisation that breaks the rules could be punished with fines, bans, or even jail time.
# The rules cover advice and sales about mortgages, as well as advertising and marketing.
#The FSA must licence and oversee all mortgage advisors, whether they are brokers or lenders.
#Anyone who gives advice on mortgages must have the right training and professional qualifications.
The FSA is very interested in making the mortgage market clearer when it comes to sales and advertising, so that borrowers can shop around and make good decisions. Before a borrower applies for a mortgage, any mortgage advice, whether it comes from a lender or a mortgage broker, must come with an Initial Disclosure document (IDD) and a Key Facts Illustration (KFI). These two documents have been made the same for all mortgage products so that you can compare them.
What are IDDs?
The initial disclosure document (IDD) must be given to the borrower at the first meeting. If the first contact is over the phone, the main points must be summed up and explained in writing within five working days. The IDD must talk about the following:
# Whether advice is given or just information about the product.
# Whether the lender or broker has access to the whole mortgage market, a limited panel, or even just one lender.
# Information about the fees.
# Information about how to file a complaint, including an address where you can send a letter.
What are KFIs?
Before a mortgage application is made, the lender or broker must give a correct Key Facts illustration. The KFI is a standard document that has to include the following:
# How much the loan will cost in total.
#Any fees that come with the mortgage, such as the broker's commission if the mortgage is closed.
# The full details of the mortgage product, including the interest rate, the monthly payments, and any fees.
# The risk of changes in rates and how payments affect things.
Does the FSA have rules for every kind of mortgage contract?
Under the new rules, the FSA is not in charge of regulating buy-to-let and business mortgages right now.
What Should You Do If Someone Complains?
First, you need to talk to the mortgage broker or lender about how to solve the problem. If the company doesn't give a good answer, the complaint could be taken to the Financial Ombudsman Service.
