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FSA Publications

The Financial Services Authority invites comments on this Consultation Paper.Comments should reach us by 30 March 2012.

You can send your response by electronic submission using the following form or by emailing us at the address shown.

Alternatively, please send comments in writing to:

Lynda Blackwell
Conduct Policy Division
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS

Or fax comments to: 020 7066 8795

Email: cp11_31@fsa.gov.uk

It is the FSA's policy to make all responses to formal consultation available for public inspection unless the respondent requests otherwise.

Note: You can take a printout of your response before clicking the 'Submit to FSA' button at the end of the form, but this will only print the visible text on screen, and you may have given longer answers. After submitting your response, the form will clear, but when we acknowledge receipt of your response by email, we can return to you a copy of your full submission as received. Check this box if you would like to have a copy of your submission returned:

Submission Details









as an individual
as a representative of an authorised firm
as a representative of a professional firm
other (please specify):

Do you agree that lenders should detail how they incorporate anti-fraud controls into their affordability assessments in their responsible lending policy?

Do you have any comments on our income proposals?

Do you agree with this approach to expenditure? Do you have any comments on the categories of expenditure? Do you have any practical concerns about implementing this approach?

Do you have any comments on our proposed approach to assessing affordability against future interest rate increases?

Do you agree with our assumption that 90% of lenders already apply a stress-test?

Do you think that lenders are currently applying a stress test of a similar degree to the test we propose?

Do you have any comments on our proposal to drop the requirement that affordability should be assessed on a maximum term of 25 years?

Do you have any comments on our proposals to protect credit-impaired consumers?

Do you think that our proposed enhanced sales standards will provide adequate protection for Right to Buy consumers? Are further measures required?

Do you think income multiples could work under our proposed rules? If not, why?

Do you have any comments on our proposal to require lenders to take into account information about future changes to income and expenditure?

Do you agree, that to ensure these proposals work, we should define a credit-impaired consumer? Do you agree with our proposed definition?

Which option do you prefer? Option 1, where the lender would be required to take reasonable steps to ensure that debts to be consolidated are repaid? Or option 2 where the lender would be required to assume that debts to be consolidated remain outstanding for purposes of assessing affordability? If you disagree with both options, what do you suggest as an alternative?

Do you agree with our proposals to strengthen lender’s systems and controls around responsible lending?

Do you have any comments on our proposed transitional arrangements? Do you think they will be sufficient to address risks to consumers? Will they create any additional risks to consumers?

Do you think that there is sufficient protection for mortgage borrowers who are ‘trapped’ with their current lender? If not, what additional protection do you suggest?

Do you think the eligibility requirements are appropriate? Should we allow these transitional arrangements to be used where the new monthly payment is higher?

 

Should we allow the transitional arrangements to be used where there is a material change to the mortgage, such as the removal of a borrower following a divorce? How could gaming be prevented?

 

Do you think these arrangements will be practical to implement? How could they be improved or simplified?

 

Do you agree that the draft rules on responsible lending in the draft Mortgage Market Review (Conduct of Business) Instrument 2012, at Appendix 1, reflect the stated policy intention?

Chapter 4

What is your view on our approach to assessing affordability for interest-only mortgages?

 

Do you agree that we should apply a consistent approach to regulating interest-only across the board and that we should not adapt our approach according to different consumer types?

 

Do you agree with our non-prescriptive approach to repayment strategies, or do you have any comments on this approach?

 

Do you agree that lenders should be free to set their own appropriate controls around repayment strategies?

 

What is your view of our proposals for lenders’ interest-only policies?

 

What are your views on our approach to requiring lenders to assess the repayment strategy prior to entering into the mortgage?

 

What is you view of our proposals for the ongoing management of interest-only loans? Do you foresee any practical issues?

 

Do you have any comments on the proposed changes to the glossary term, or the consequential changes?

 

Do you have any comments on the draft interest-only rules set out in the draft Mortgage Market Review (Conduct of Business) Instrument 2012 at Appendix 1? Do you think the rules reflect the stated policy intention?

Chapter 5

Do you have any comments on our proposed approach to intermediaries’ role in assessing affordability?

 

Do you have any comments on our proposed approach which allows high net worth consumers and mortgage professionals to opt-out of receiving advice and purchase on an execution-only basis?

 

Do you have any comments on our proposed definition of a ‘mortgage professional’? (A question about the definition of a high net worth consumer is at the end of paragraph 10.83 in Chapter 10.)

 

Is there anything we can do to mitigate the risk of intermediaries using these exceptions to circumvent the rules?

 

Are there any other consumer types you think should be able to purchase on an execution-only basis in an interactive sale?

 

Do you have any comments on our proposed approach which allows consumers to opt-out of advice when purchasing products online or by post and allows them to purchase on an execution-only basis?

 

We are proposing that consumers who are vulnerable (i.e. equity release, Sale and Rent Back or right-to-buy consumers and those who are consolidating debt) should always be advised and therefore will not be able to purchase their mortgage through a non-interactive process. Do you have any comments on this approach?

 

What are your views on our proposal to allow high net worth consumers and mortgage professionals to opt-out of receiving advice irrespective of whether they are considered to be vulnerable?

 

Are there any other consumer types you think should always receive advice?

 

Do you agree that, except in the case of Sale and Rent Back, we should allow consumers to reject advice and proceed on an execution-only basis?

 

We are proposing that intermediaries monitor their execution-only business. Do you have any comments on our proposed approach to monitoring?

 

Are there any other steps we should take to ensure that consumers are protected when purchasing on a non-interactive basis, e.g. should we place any other limitations on the types of consumers who are able to purchase online?

 

Do you agree that we should be specific about the appropriate method of disclosing service fees that are not simple flat fees?

 

Do you have any comments about our revised approach to the requirements for the messages on product range and remuneration to be given ‘clearly and prominently’?

 

Do you consider that the combined IDD template remains useful with respect to mortgage service disclosure?

 

Do you agree that we should not apply the ‘independent’ and ‘restricted’ labels to the mortgage market, but instead require intermediaries to explain to the consumer in clear and straightforward terms any limitations to their service?

 

Do you have any views about our updated proposals for product disclosure?

 

Do you have any comments on the draft rules on distribution and disclosure as set out in the draft Mortgage Market Review (Conduct of Business) Instrument 2012 at Appendix 1?

Chapter 6

Do you have any comments on the proposed policy approach on the calculation of payment shortfall charges?

 

Do you have any comments on the proposed policy approach on direct debit payments?

 

Do you have any comments on the proposal to extend the application of MCOB 12.4 and 13.3 rules to include payment shortfalls?

 

Do you have any comments on the proposal to replace MCOB 12.4.1 R (2) with a rule permitting firms to remove concessionary rates where there is a material breach of contract unrelated to payment shortfall?

 

Do you have any comments on the draft rules on arrears management as set out in the draft Mortgage Market Review (Conduct of Business) Instrument 2012 at Appendix 1?

Chapter 8

Do you agree that the new prudential requirements are unsuited to meeting the objectives of the MMR, specifically deterring high-risk lending?

Chapter 9

Do you have any comments on the proposed risk-based capital requirement?

 

Do you have any comments on the proposed restriction in the eligible capital calculation?

 

Do you have any comments on this proposed liquidity regime?

 

Do you have any comments on the proposed scope and application of the regime?

 

Do you have any comments on the draft rules set out in the draft Prudential Sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (Non-Bank Lenders) Instrument 2012 at Appendix 1? Do you think the rules reflect the stated policy intention?

Chapter 10

Do you have any comments on our views, summarised in the table at the end of this chapter, about the MMR proposals which are either not applicable or where a straight read-across to the equity release market is appropriate?

 

What are your views on our proposal to treat the equity release market as a single market for regulatory purposes?

 

Do you have any comments on the tailoring we propose in relation to execution-only sales following rejected advice and scope of service?

 

Is any other tailoring required for the equity release market? If yes, please explain.

 

Overall, do you have any other comments on our proposed read-across of the MMR to the equity release market?

 

Do you have any comments on our views, summarised in the table at the end of this chapter, about those mainstream MMR proposals which are either not applicable or where a straight read-across to the Home Purchase Plan market is appropriate?

 

Do you have any comments on the tailoring we propose in relation to execution-only Home Purchase Plan sales following rejected advice and enhancing sales standards?

 

Is any other tailoring required for the Home Purchase Plan market? If yes, please explain.

 

Overall, do you have any other comments on our proposed read-across of the MMR to the Home Purchase Plan market?

 

Do you have any comments on our views, summarised in the table at the end of this chapter, about those mainstream MMR proposals which are either not applicable or where a straight read-across to the Sale and Rent Back market is appropriate?

 

Do you have any comments on the tailoring we propose in relation to not allowing Sale and Rent Back consumers to reject advice?

 

Is any other tailoring required for the Sale and Rent Back market? If yes, please explain.

 

Overall, do you have any other comments on our proposed read-across of the MMR to the Sale and Rent Back market?

 

Do you have any comments on our proposal to define a bridging loan as a regulated mortgage contract with a term of 12 months or less?

 

Do you have any comments on how the affordability proposals should be applied to consumers taking out bridging finance?

 

Do you have any comments on our proposed read-across of our interest-only proposals to bridging finance?

 

Do you have any comments on our proposal that lenders consider the repayment or exit strategy of the borrower, and have a clear lending policy that reflects this?

 

Do you have any comments on our proposals about extending bridging finance loans?

 

Are there any other factors that firms should consider in order to determine that a bridging loan is appropriate?

 

Do you have any comments on our proposal which requires that intermediaries who only offer bridging loans should describe the restriction on their service to the consumer?

 

Do you have any comments on the proposed prudential regime for bridging lenders?

 

Do you agree with our views, summarised in the table at the end of this chapter, about the MMR proposals which are either not applicable or where a straight read-across to the bridging finance market is appropriate?

 

In addition to the proposed tailoring set out above, is any other tailoring required for the bridging finance market? If yes, please explain.

 

Overall, do you have any other comments on our proposed read-across of the MMR to the bridging finance market?

 

What are your views on our approach to high net worth consumers? Should we adopt a more free-market approach, recognising that for some consumers, regulation is not needed to protect them from the decisions they make?

 

Would an elective approach similar to that adopted in the investment market be appropriate?

 

Would it be appropriate for all mortgage rules to be forgone?

 

Would it be appropriate for all regulatory protections for high net worth to be forgone or should some, such as redress, for example, be retained?

 

What are your views on defining high net worth consumers – what do you consider the appropriate figures for income and assets?

 

Do you agree that it is appropriate to extend the definition to include high net worth consumers acting as guarantors?

 

Do you have any comments on how the affordability proposals should be applied to high net worth consumers?

 

Do you have any comments on our proposal to extend the tailored disclosure rules to high net worth consumers?

 

Do you think that to achieve this, an elective approach similar to that adopted in the investment market would be appropriate?

 

Do you agree with our views summarised in the table at the end of this chapter about the MMR proposals which are either not applicable or where a straight read-across to high net worth lending is appropriate?

 

In addition to the proposed tailoring set out above, is any other tailoring required for high net worth lending? If yes, please explain.

 

Overall, do you have any other comments on our proposed read-across of the MMR to high net worth lending?

 

What are your views on our approach to business lending? Should we adopt a similar approach to that proposed for high net worth consumers, recognising that for some consumers, regulation is not needed to protect them from the decisions they make?

 

How would we draw a line between those business borrowers able to take the risk and those who are not?

 

How would we prevent this proposal from being exploited as a means of circumventing our affordability proposals?

 

Would it be appropriate for all mortgage rules to be forgone or should some, for example the arrears rules, be retained?

 

Do you have any comments on how the affordability proposals should be applied to business borrowers?

 

Do you have any comments on the proposed approach to professional standards in business lending?

 

Do you agree with our views summarised in the table at the end of this chapter about the MMR proposals which are either not applicable or where a straight read-across to business lending is appropriate?

 

In addition to the proposed tailoring set out above, is any other tailoring required for business lending? If yes, please explain.

 

Overall, do you have any other comments on our proposed read-across of the MMR to business lending?

 

Do you have any comments on the draft rules specific to niche mortgage markets in the draft Mortgage Market Review (Conduct of Business) Instrument 2012 at Appendix 1? Do you think the rules reflect the stated policy intention?

Annex 1 CBA

Do you have any comments on our estimates for the impacts of the affordability assessment? Do you have any data and/or analyses that could be informative about these impacts?

 

Do you have any comments on our estimates for the impacts of the interest rate stress test? Do you have any data and/or analyses that could be informative about these impacts?

 

Do you have any comments on our estimates for the impacts of the interest-only proposals? Do you have any data and/or analyses that could be informative about these impacts?

 

Do you have any comments on our estimates of the combined impacts of the responsible lending requirements? Do you have any data and/or analyses that could be informative about these impacts?

 

Do you have any comments on our estimates for the lending impacts of the responsible lending requirements? Do you have any data and/or analyses that could be informative towards estimating these impacts?

 

Do you have any views on whether this balance between winners and losers is acceptable, given the importance of the protection obtained by the winners?

Annex 2 EIA

Do you have any comments on the age-related issues discussed above?

 

Are there any other age-related impacts from our proposals not highlighted above? If yes, please provide details.

 

Do you have any comments on the disability-related issues discussed above?

 

Are there any other disability-related impacts from our proposals not highlighted above? If yes, please provide details.

 

Do you have any comments on the gender-related issue discussed above?

 

Are there any other gender-related impacts from our proposals not highlighted above? If yes, please provide details.

 

Do you have any comments on the pregnancy and maternity-related issue discussed above?

 

Are there any other pregnancy and maternity-related impacts from our proposals not highlighted above? If yes, please provide details

 

Are there any race-related impacts from our proposals that we should consider? If yes, please provide details.

 

Do you have any comments on the religion-related issues discussed above?

 

Are there any other religion-related impacts from our proposals not highlighted above? If yes, please provide details.

 

Are there any sexual orientation-related impacts from our proposals that we should consider? If yes, please provide details.

 

Are there any transgender-related impacts from our proposals that we should consider? If yes, please provide details.

Do you have access to, or know of, any statistics regarding the mortgage needs and habits of groups with protected characteristics that could help us with our analysis? If yes, please provide details.

 


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