Mortgage Credit Directive (MCD)
What is an European Directive? • A "directive" is a legislative act that sets out a goal that all EU countries must achieve • However, it is up to the individual countries to devise their own laws on how to reach these goals
What is the Mortgage Credit Directive (MCD)? • Introduces a European framework of conduct rules • Covers changes to first charge and second charge mortgages • Where possible the existing MMR rules have been used • Comes into operation on 21 st March 2016 • Lenders have until March 2019 to finalise their changes
Our Activity for MCD • We asked all Lenders to complete questionnaires explaining their position and provided additional pieces of data required to source products correctly • We collated the answers and made development changes • MortgageBrain Classic and MortgageBrain Anywhere are being updated to accommodate requirements • Discussions took place with Corporates and Networks too
What have we implemented? • Second charge/Secured Loans now regulated • Introduction of LoansBrain • Foreign currency mortgages • Consumer Buy to Let • Remortgage registration fee • Historic APRC • Additions to existing illustration – KFI • And of course, the new illustration called ESIS – European Standardised Information Sheet
What have we changed? • Both a KFI and an ESIS will be produced from sourcing • KFI button renamed ‘Illustration’ • Select the document displayed by default in settings • Option of producing either or both KFI & ESIS • Easy comparison of products possible as you can show clients the same documents from different Lenders
Secured Loans • Previously governed by the CCA – Consumer Credit Act • Now comes under the MCD directive and regulated • Only available to be sold through Master Brokers • Master Broker acts like a packager and is responsible for issuing ESIS and other supporting documentation • Broker still retains the responsibility of risk to the consumer
LoansBrain – Free Second Charge Loan Sourcing website • Free to use • No need to register • Carry out either a quick or a detailed source • Source and then refer or simply refer your clients' needs • Supported by Fluent Money, the UK's largest Master Broker • www.loansbrain.co.uk
Foreign Currency Mortgages Definition: A mortgage in Sterling (£) for a property in the UK but where either the customer is using funds from a currency other than Sterling to make part or all of the payments, or the customer lives outside the UK. So an example might be someone buying a property in London but who works for an overseas firm and is paid in Euros or Dollars. • Few Lenders currently offering these products • Only an ESIS will be produced for a foreign currency mortgage • Additional filter on Start Screen & Additional fee in the scheme details
Consumer Buy to Let Definition: A new category that ‘accidental’ landlords fall into. Usually as a result of inherited property or where the individual/s concerned were living in the property and have subsequently rented it out rather than sell, i.e., Let to Buy. The landlord will be classed as a Consumer BTL and will enjoy protections through FOS and additional consumer focused precautions. • Regulated contracts which fall under MCD • Buy to Let filter will source on Consumer and Business Buy to let • Consumer Buy to Let filter will be introduced prior to 21 st March 2016 and displayed on the Buy to Let tab
Remortgage Registration Fee Definition: Mortgage registration fees are the fees charged by the land registry for registering a mortgage on a property. They are national fees that don’t vary between Lenders, but do vary between countries. • The fee has to be displayed within the ESIS only, but only if the Lender is charging for it • All countries offer a discount on the fee if it is paid electronically, so some Lenders will include this as a fee in the ESIS and some will mark it as an unknown fee because of how the Client may pay for it
Remortgage Registration Fee (cont.) • An additional Country dropdown list has been included on the Property tab • The fee is displayed in the Fees & Rates section • Also displayed under the APRC reference on the ESIS • You can choose the country to be defaulted permanently through Settings
New KFI (previously referred to as KFI+) • Existing KFI with additional items of data: • Reflection period - Where an MCD mortgage lender provides the consumer with a binding offer, it must give the consumer a reflection period of at least seven days. • APR has been renamed to APRC – Annual Percentage Rate of Charge • Historic APRC – The Historic APRC is calculated using rates based on the difference between the current BBR and the highest BBR value in the last 20 years
ESIS - European Standardised Information Sheet • Brand new illustration – dynamic sections • From 21 st March 2016, some Lenders will choose to produce an ESIS, others will continue with a KFI • To enable an ESIS to be produced, specific wording is required from the lenders • Additional Obligations text • Non Compliance text • Additional Information text • Lender Address and Telephone Number
ESIS (cont.) • Additional information required for an ESIS to be produced includes: • Foreign currency • Tied Savings Product • Global Fees (Registration Fee) • Unknown Costs • Lenders have until March 2019 until they have to solely produce an ESIS
Illustration Production • Originally the KFI tab now ‘Illustration’ tab Changes have been made to the Illustration production to cater for the compilation of an ESIS: • Details Tab - Client Property Address • Details Tab - Company Website Address • Proc Fee Tab - KFI and ESIS Proc Fees are different • Insurances Tab - includes an entry for tied savings account • Complaints Tab - You are required to enter the necessary text which is saved permanently
Illustration Production (cont.) • Conveyancing Tab - no requirement for a nominal amount and now allows you to enter a fixed amount • Foreign Currency Tab - Only appears when quoting a foreign currency mortgage • Assumption text – where a Lender has not provided the required information, there is a disclaimer at the top of the ESIS which covers: • Additional Obligations • Other Rights of Borrowers • Non-Compliance • Additional Information
Illustration Production (cont) Items that have been included in the ESIS or repositioned on the KFI are: • Proc Fee • Client’s property address • Value of property • APRC and Historic APRC • Reflection period – above Section 1 of KFI
Thank You If you have any queries please call our Customer Support team on 0208 665 3200 customerservices@mortgage-brain.co.uk
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