Dear Advisers
I have been asked to provide information on how MCD might change how brokers operate. I thought this might be helpful to you:
I’ll take it for granted that every broker understands their obligations under MCD with regard to mortgages. However, here are some practical points to help ensure your client and your pocket is not too adversely affected.
For any specific help, as always, call your underwriter at Promise on 01902 267443.
Mortgages
If you have issued your clients with a KFI – they need to proceed quickly. After the 18th of March, if the offer is not accepted they can expect the mortgage to be fully underwritten again in accordance with new MCD rules. That means harsher affordability checks, potentially tougher criteria and more questions asked = more hassle and more declines.
Secured Loans
Any pipeline cases on existing criteria need to be paid out by 18th March. After that MCD stress testing etc will apply. That means every application on CCA documents will need to be reassessed for new criteria but, unlike first mortgages, totally new MCD documents issued.
What you should do?
- Submit any second charge cases which are marginal on income NOW – time is running out.
- If you have cases being processed, stress to customers the urgency of returning documents.
- Do what you can to ensure any existing enquiries / cases complete by 18th March.
What about new second charge enquiries?
The industry will adopt MCD early so that most pipeline cases are on the correct criteria and documents by the time we get to March 18th.
We hope to start offering loans under MCD from 15th Feb. If left later the cases may not complete in time. This date may get pushed back if the majority of our lenders are not ready.
What will you need to do differently?
Once the second charge industry moves to a MCD regime (on or around 15th Feb) lenders will largely impose new criteria and affordability rules. We can sort that part out.
The main difference for you is that all second charge sales will need to be on a fully advised basis.
That means spending the same amount of time on a loan as you do with a mortgage including full fact finds and suitability letters. Who ever gives the advice is on the hook.
What are your options for writing new business?
With Promise, they are pretty much the same as they are right now.
- You can still refer an enquiry to us. We will look after the full fact find and advice - we have been doing this for some months so expect none of the teething problems our competitors will suffer.
OR - You can advise on the loan yourself. We will support you with finding a suitable product plus providing research records for your compliance file. The big difference here is you can’t do non advised sales on regulated second charges any longer – It’s full advice or referral only.
Any changes to the process will appear on our website but if you are unclear please speak to your underwriter.
If you don’t have a tight relationship with your underwriter now is a good time to get one. Call 01902 267443.
I hope this helps you overcome this “bump” in the road.
Regards,
Steve Walker
Promise Solutions
01902 267443
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