Topic 8 Flashcards
Regulation and the buying process (53 cards)
What are the key regulatory stages in the mortgage application process?
Financial promotions (MCOB 3A)
Making an application (MCOB 5 and 5A)
Initial disclosure (MCOB 4 & 4A)
Receiving a mortgage offer (MCOB 6 and 6A)
Providing advice and lending responsibly (MCOB 4, 11 and 11A)
Disclosure at the start of the contract (MCOB 7)
What is a financial promotion under MCOB 3A?
An invitation or inducement to engage in an investment activity, including mortgages, through any media such as calls, ads, websites, or mailshots.
Who can carry out or approve financial promotions for mortgages?
Only individuals or firms authorised by the FCA can carry out or approve them.
What types of financial promotions are exempt from MCOB rules?
Promotions with only general information about the firm without any inducement to take up a mortgage or service.
What must non-real-time financial promotions include?
Company details, clarity of information, repossession risk warning, APRC, interest rate type, total credit, term, instalments, total payable, representative example, and must be fair and not misleading.
What is a representative example in a non-real-time promotion?
One where at least 51% of responders would receive the APRC shown or lower.
How long must firms retain records of non-real-time financial promotions?
At least 12 months from when they were last used.
What is a real-time financial promotion?
Any promotion involving interactive dialogue, such as by phone or face-to-face.
When are unsolicited real-time calls (cold calls) permitted?
Only if there’s an established relationship and the customer expects such contact.
What rules apply to real-time promotions?
Must not occur at unsocial hours, must not use unlisted numbers without consent, the caller must identify themselves, check if the customer agrees to proceed, end if not, and must be clear, fair, and not misleading.
What is initial disclosure under MCOB 4 and 4A?
Information provided to a borrower about the firm’s services and status before any mortgage arranging or advisory activity starts.
What types of markets does initial disclosure cover?
Regulated mortgages for business and non-business purposes.
Who is responsible for providing initial disclosure?
The lender if arranged directly, or the intermediary if arranged through one.
In what form must initial disclosure be provided?
In a durable medium, such as paper or a format that allows the information to be stored and reproduced unchanged.
What must initial disclosure tell the customer?
The range of products offered, how the firm is remunerated, and any alternative finance options if the customer wants to increase secured borrowing.
What are the three types of service in terms of product range?
Unlimited – a representative range from across the market
Limited – from a selected panel of lenders
Single lender – only from one lender
What must a firm disclose about its remuneration?
Fees charged to the customer, timing of fees, commission or procuration fees from lenders, and whether commission is offset against customer fees.
What happens if exact fees can’t be stated at initial disclosure?
The firm must provide examples or likely costs and disclose the actual amount later in the ESIS.
What must a firm inform a borrower looking to raise further funds on a mortgaged property?
The firm must inform them that alternative funding may be available via a further advance, a second charge, a mortgage with another lender, or unsecured borrowing.
How must a firm mention a lifetime mortgage to a customer considering a retirement interest-only mortgage?
The firm must inform the customer, orally or in writing, that a lifetime mortgage may be available and more appropriate.
How can firms simplify disclosure when varying a pre-21 March 2016 mortgage contract?
They may provide disclosure documentation that meets MCD requirements to avoid issues with dual systems.
When must advice be provided in the mortgage sales process?
Before a contract is arranged or entered into, especially if there is interactive dialogue with the customer.
What must be included in the adequate explanation for MCD regulated mortgage advice?
ESIS information, product characteristics, product impact (e.g. on default), scope of service, fees, and intermediary remuneration.
Under what conditions is execution-only permitted in a mortgage sale?
When there’s no interactive dialogue, the customer fits one of three categories (HNW, professional, business), or the firm only provides factual info/ESIS and the customer chooses execution-only.
