The FCA has published Policy Statement 15/9: Implementation of the Mortgage Credit Directive and the new regime for second charge mortgages, feedback to CP14/20 and final rules (PS15/9).
In PS15/9, the FCA summarises the feedback it received to its September 2014 consultation on implementing the Mortgage Credit Directive (MCD) and sets out its final rules and policy.
Key points in PS15/9 include:
- in general, respondents welcomed the FCA’s intention to use its existing rules and copy-out to implement the MCD. However, the consultation revealed a compatibility issue between the MCD and the FCA’s existing responsible lending regime, which has meant that it must change its rules so that all consumers who re-mortgage with a new lender must have an affordability assessment, even if the consumer is not looking to borrow more;
- whilst not changing its overall policy response, the FCA is making certain changes to its proposed rules and further details are set out in chapter 2; and
- the FCA is proceeding with most of its proposals concerning how it will regulate second charge mortgages. However, there are some changes. For example, the FCA has simplified the interest rate stress test that second charge firms will be required to carry out on higher priority mortgages as part of the affordability assessment. In addition, the FCA notes that second charge firms have expressed concern with the overall weight of regulatory change they would face in the lead up to the implementation date of 21 March 2016. The FCA is therefore introducing Product Sales Data ‘sales’ and ‘performance’ reporting for second charge firms a year later than originally intended.
In Q3 2015 the FCA proposes to consult on how its knowledge and competence requirements will apply to firms passporting into the UK under the MCD. At the same time the FCA also plans to consult on the forms for notifying an intention to passport.
The FCA also expects that later this year the European Banking Authority will publish the outcome of its consultation on two sets of guidelines on the assessment of creditworthiness and arrears and foreclosure. The FCA will then consider whether there is a need for it to change its rules as a consequence.
The majority of the FCA’s final rules will come into force on 21 March 2016.