CML members are adopting a new statement of practice on buy-to-let mortgage lending ahead of coming regulation of consumer buy-to-let products by the Financial Conduct Authority (FCA).
Council of Mortgage Lenders members are adopting a new statement of practice on buy-to-let lending, designed to provide clarity about how responsible buy-to-let lenders operate.
The statement reflects existing good practice and gives a clear explanation of the obligations of buy-to-let borrowers on their mortgages.
It gives landlords additional information from other organisations about the responsibilities of being a landlord, and has been endorsed by the Residential Landlords Association, the Association of Residential Letting Agents, the Association of Mortgage Intermediaries, the Intermediary Mortgage Lenders Association, and the British Bankers Association (BBA).
So far thirty-one lenders representing an around 90% of the buy-to-let lending market have adopted the statement of practice. It is expected that all CML members offering buy-to-let mortgages will adopt it during 2015.
The statement sets out the main principles that individual lenders use in determining their own lending strategy and practice:
– Lending principles
– Information given to customers
– Customer responsibilities
– Lender responsibilities on affordability
– Handling financial difficulty
– Fraud prevention; and
– Complaint handling.
When the “consumer” buy-to-let lending framework is established in 2016 under the FCA, to comply with the EU Mortgage Credit Directive, buy-to-let lending will fall into one of three types:
1 – Mortgages regulated by the FCA like residential mortgages. These are when the property is either partly occupied by the borrower or let to an immediate family member.
2 – Mortgages regulated by the FCA under the Mortgage Credit Directive Order 2015. These are “consumer” BTL as defined by the Order.
3 – Mortgages not regulated by the FCA. These are mortgages which are predominantly for a business purpose.
The statement of practice will cover any residential buy-to-let lending not then covered by FCA regulation.
CML director general Paul Smee said:
“Lenders know how important it is to have a transparent mortgage market, in which borrowers can have confidence, and where lending policy is both responsible and clearly understood. The new buy-to-let statement of practice reflects what responsible lenders already do and offers a clear explanation of how buy-to-let lenders operate. We hope it will make a valuable contribution to understanding the buy-to-let lending environment.”
Source – CML
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