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Mortgage Regulations 2004

From the 1st November 2004 mortgages became regulated products under the regulation of the FSA.

Under the regulations the FSA will periodically collect information about firms who carry on one or more of the following activities:

• Mortgage lending or administration
• Mortgage arranging or advising
• The sale or administration of general insurance or pure protection contracts, and
• Retail investment activities

The above list would also include any subsidiaries of companies that sell regulated products.

Companies will have to submit the following reports to the FSA on their product sales and portfolio performance:

• Product Sales Data (PSD)
  • The FSA believe that PSD represents the most cost effective way of obtaining good quality, accurate information to under pin their supervision strategy, and that providers should supply the data as opposed to the intermediary firms.
  • The FSA has released the latest edition of its online PSD newsletter. This can be found on the FSA website on their dedicated PSD page.
• Mortgage Lending Activity Report (MLAR)
  • This information is required in order for the FSA to assess the impact and probability of firm failure, which also helps to assess the risks in the mortgage market as a whole
  • The FSA has published a series of questions and answers to help lenders with MLAR submissions.
  • They have also published an updated set of guidance notes for the MLAR.
• Retail Mediation Activity Report (RMAR)
  • The FSA originally proposed (see CP197) that the RMAR should be submitted half yearly by most firms and that larger firms should submit the financial sections quarterly. However in order to reduce the cost of reporting for smaller firms the FSA have introduced a transitional provision to exclude them from the requirement to submit financial information (sections A to E of the RMAR) mid-year for the first year.

The FSA also intend to introduce an educational programme, providing more information to firms on how to complete the reporting requirements.

The PSD and MLAR are needed to establish whether or not a mortgage is sold to a customer who has an impaired credit history. 'Impaired credit history' falls in to five definitions:

• Arrears on a secured loan in the last two years greater than three months.
• Arrears on an unsecured loan in the last two years greater than three months.
• A CCJ in the last three years.
• Being bankrupt in the last three years.
• Having an Individual Voluntary Arrangement in the last three years.

All the definitions apply to the applicant only and do not consider financial associates.

The FSA will evaluate the data collected from firms, as well as supplementary information from other sources, by using a risk-profiling tool. This tool will create:

• 'Alerts' – these will highlight any instances where firms may not be complying with the FSA principles, threshold conditions or rules; and
• 'Risk indicators' – these will highlight something which the FSA may want to record because the information may be symptomatic of other problems Within the firm.

Timescales

Milestones in Implementing the Reporting Requirements	Date
Firms need to begin collecting information: (For retail mediation activities and mortgage lending and administration)	1 April 2005
Product providers need to begin collecting product sales data	1 April 2005
Firms report information to the FSA in accordance with their accounting reference date (for retail mediation activities and mortgage lending administration)	From July 2005
Product providers submit product sales data to the FSA, as at the end of each calendar quarter.	From July 2005

All firms will need to register with the FSA on the Transaction Reporting System (TRS) where they can submit their data manually or via XML. The FSA are developing a training package to support firms using the TRS system.

The FSA have created a schedule with target Registration/Certification dates for all firms during August and September 2005 (this will be in a 'by week' format)

The process of Registration/Certification will ensure that all firms are ready to complete the PSD reporting between the 3rd and 28th October, to cover the first two quarters i.e. data from April to end of September 2005.

Callcredit have a complete range of services available to help you meet your reporting requirements under the Mortgage Regulations.

If you require further information please contact: enquiries@callcredit.co.uk

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