A-Z of Seconds
Automatic adding of fees is no more. Clients are now able to choose whether to pay fees up front or add to the loan.
Binding offers. Once a lender is satisfied that the client can afford the second charge mortgage it will issue a binding offer, valid for 30 days.
Client responsibility. Once regulated advice is in play a mortgage broker can issue the advice or pass the client on to a master broker who can take responsibility for the client advice.
Disclosure rules. You must ensure your client is fully aware of what you offer, what you can and can’t advise them on and what options are available to them.
ESIS. Lenders will provide an illustration of the product chosen in the form of a European Standardized Information Sheet (ESIS).
FCA regulation. If you didn’t know this one then you should be worried! 31st March 2016 marked the date the interim permissions period ended and the consumer credit industry came under full FCA regulation.
Getting Paid. If you receive proc fees from a lender you must make your client aware and clearly outline the commission levels.
How does a second compare to a remortgage? No longer is it acceptable to assume a remortgage is the best option. The broker must show they have at least considered a second as an alternative solution for raising funds.
Independent Status. If a broker chooses to refer clients to a master broker they forfeit the right to label themselves independent.
John Griffiths Jones. Now the FCA are in charge it’s important to know who is who – John Griffiths Jones became chairman of the FCA in April 2013.
KFI has gone, long live the Esis. Keys facts illustration traditionally used in the first charge world is being phased out and replaced with the Esis.
Lender integration. Greater XML integration between lenders is slowly becoming a reality.
MCOB. With second charges now fully under the FCA’s remit the sector is now covered by Mortgage Conduct of Business rules so second charge firms need to get familiar with them.
New entrants. With second charges brought into the FCA fold its likely we will see a host of new lenders enter the market and existing lenders expand their offerings.
Obtain first charge mortgage consent. As has always been the case first charge lenders will have to give consent for a borrower to take on a second charge loan and has the right to decline it. Speculation as to whether this will affect the markets ability to operate a level playing field continues.
Packagers. If mortgage brokers choose to advice on second charge loans the likelihood is they will need to utilize the expertise of packagers.
Quick fact finds. Are a thing of the past, gone are the days of asking a couple of questions to determine what your client is looking for, fact finds can take over an hour.
Reflection period. Consumers should be given time to consider their offer in the form of a seven day reflection period which begins the day the binding offer is issued.
Stress testing. Second charge lenders now have to perform stricter stress testing on loans; the market must operate like the first mortgage market and assess affordability with a potential bank of England rate increase in mind.
Time difference. Although there is a need to collate more information at the start of the process , the 17 day cooling off period is no longer and as such a secured loan can complete relatively quickly compared to a first charge mortgage.
Unsecured. For smaller loans unsecured remains an alternative.
Verifying affordability. Responsibility for this lies firmly at the door of the lenders.
Whole of Market. If a broker wants to remain whole of market they will need to offer products from the whole of the mortgage market – including second charge loans.
X-ray vision. Brokers will need x-ray vision to see through some of the pitfalls that may lie ahead if they are not used to offering true advice.
Yes. It’s as simple as that. If you want to help your clients.
Zero. Hopefully the number of complaints you will receive.
For more help and advice please do not hesitate to contact me.
Ian Chambers @HoskinHomeLoans