Secured Loans To Be Regulated By The FSA
The Financial Services Authority (FSA) published its long awaited review into mortgage and home owner loan regulation yesterday (Monday 19th October), along with its proposals for new rules and regulations for those working in the home owner loan sector.
The newly proposed regulations are designed to protect borrowers from being allowed to take out loans which they are unlikely to be able to afford and places more emphasis on the loan provider to ensure that the affordability criteria is fully met and also make them responsible for the borrower’s ability to repay the loan in full.
As part of the proposals, the FSA intend to introduce regulation for any loan secured on a person’s property. This, of course, includes traditional secured loans, or second charge home owner loans and also buy to let loans, both of which have not been regulated in any way in the past.
The other most notable change in the regulation is the proposed ban on self certification loans and mortgages, which allow an individual to make a declaration of their income without any evidence or proof of their earnings. At the moment there has been no suggestion of placing a maximum limit on loan to value ratios, but the FSA have said that this has not been completely ruled out.
These proposals and reforms are currently open for discussion and comment by industry experts until the end of January next year. Feedback from the FSA will then be published in March next year and it is likely that the priority will be given to high risk areas such as arrears handling procedures.
Jon Pain of the FSA commented on the proposals, he said “We recognise that we need to bring about a step change in regulation and we need to act now to address the issues we have identified. The FSA needs to ensure that firms only lend to people who can afford to pay the money back. The reforms that we have announced today will ensure that the mortgage market works better for consumers and that it is sustainable for firms.”
