Independent review and analysis

FSA Regulation

Regulation of the Mortgage Trading Market

The Financial Secretary to the Treasury announced a package of measures last month, intended to enhance consumer protection in the mortgage market.

As part of the measures third party administrators and firms that buy mortgage books will now need to be regulated by the Financial Services Authority.

It notes that the buyers in these cases are often hedge funds and private equity firms.

The government says it has evidence that some borrowers may have been treated unfairly because their mortgage has been sold on to an unregulated firm as part of a mortgage book sale.
This could be either the purchaser of the mortgage book or a third party administrator appointed by them.

The issue of Treating Customers Fairly is clearly one that remains in the spotlight for both the Government and the FSA.

As a result many people will be reviewing their asset trading positions in the future and will need to ensure they are not exposed to potential breaches of the TCF rules. In the case of potential buyers of portfolios, this will result in more specific focus on the quality of the TCF policies and processes within the selling company. For sellers, it should result in audits ‘before sale’ or vendor due diligence, as it is becoming known.

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