The Mortgage Market Review (MMR) is a set of major reforms to the mortgage market set out by the financial services authority. These new mortgage market reviews are supposed to benefit all market participants by making the markets work better. The mortgage market review makes the financial services authority more interventional in its approach on matters of regulating the market. Some of the concerns that led to Mortgage market review include the conduct of business, charging and prudential requirements among others.
Where it all started
In October 2009, the financial services authority released a discussion paper concerning these requirements. The main purpose of these discussions was to have a deeper understanding of market analysis and assessing how effective the current regulatory framework was back then. This discussion led to various proposed changes in the mortgage markets. These proposals were under debate for a couple of years until release of the final policy statement of the Mortgage market review in October 2012. To know more visit our site www.conveyancing24-7.com.
New Mortgage Market review rules
- The Affordability Statement: In every transaction, every broker or lender must ensure that borrowers meet eligibility criteria.
- Income Verifications for all loans: Self-certification lending is no longer allowed in the mortgage market.
- No Multiple High Risk lending: The Financial Services Authority recommended the banning of high value loans for individuals with bad credit and unstable incomes, which are all characteristics of high risk lending.
- Interest rate stress tests: Lenders must conduct a mandatory interest rate stress test to determine what effect the mortgage payments will have on interest rate increase in the future.
- Redefined definition of advice: In every consumer seller interaction, the seller will need to assess suitability, therefore non-advised sales banned.
- The Execution-only exemption: The execution-only exception is to only be limited to situations where these is no interaction, customers not willing to take the advice and when the consumer has a net worth of £3M or earns nothing less than £300,000.
- Mortgage advisers accountable to FSA: A relevant professional qualification worth a level three QFC certificate status is mandatory for all mortgage advisers and staff selling mortgages.
- Initial disclosure document is replaced by a mandatory requirement for firms to give crucial information to the customer. This is to prevent overloading the customer with information. The initial disclosure document is replaced by a key facts illustration that is more suited to the customers understanding.
Desired Impact of the MMR
The mortgage market review rules were expected to make the mortgage markets suitable for all participants.
- Lenders remain competitive and innovative with adequately capitalized sustainable business models.
- A predictable and transparent regulatory body that minimizes the constant changes on house prices while minimizing fraud and financial crime in the market.
- Keeping the costs and risks of lending in the mortgage market
- A flexible market that offers a wide range of products for a variety of consumer types who can afford to buy homes.
- A clear understanding of consumers to the risks and costs of mortgage borrowing or making property and investment option instead of a home
Looking forward your thoughts……