Independent review and analysis

Countdown to MCD – ready on all fronts?

Suddenly, the implementation of the Mortgage Credit Directive (MCD) on the 21st March 2016 doesn’t seem far away.
 
Amongst all the commentary on the rights and wrongs of the upcoming changes, it is sometimes difficult to remember the purpose of the legislation, which is to introduce a European framework of conduct rules designed to encourage and develop a single market for mortgages and protect customers. That is quite a challenge given that 31 countries are trying to find a uniformed approach.
 
It can also be frustrating for some of our lenders, given that it is widely acknowledged that the United Kingdom is probably the most advanced country within the European Economic Area when it comes to existing mortgage legislation. But we have gone further and decided to take action over and above what is required to comply with MCD; bringing second charge mortgage advice, processing and servicing in line with first mortgage procedures.
 
On the surface that looks like a sensible move but is potentially quite challenging for owners of the many loans which are currently regulated under the Consumer Credit Act (CCA). As an example in a specialist area, house builders who have previously offered shared equity loans, with resultant second or subsequent charges being taken over the property, will be affected. The changes will mean that mortgage conduct of business (MCOB) rules will apply to those existing regulated loans as well as new ones.
 
There are a number of back book servicers who exclusively administer second charge loans. They too will be subject to the new legislation and will have to have policies and procedures in place to deal with the impact of post contract variations.
 
So, with only 4 weeks to go, we have seen a number of lenders announce they are MCD ready. We are sure that whilst preparation works continue within lenders and servicers, the knock on effects within some sectors of the market have yet to be resolved.
 
Clearly there is a need to ensure that a well-constructed strategy is in place to navigate through these challenging times.

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