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Govt tightens up on firms buying mortgage books

Homeowners whose mortgages are sold by their lender to an unregulated firm will have additional protection as part of a package of measures to improve consumer protection in the mortgage market.

The Government has announced today measures to ensure consumer protections are maintained when a mortgage book is sold by a mortgage lender to an unregulated firm.

The Government says it has evidence that some borrowers may be treated unfairly because their mortgage has been sold on to an unregulated firm as part of a mortgage book sale.

As a result the Government is requiring the firm that deals with borrowers to be regulated by the FSA.

This could mean the buyer of the mortgage book itself, or a third party administrator appointed by the firm buying the loan book.

The measures will also see the transfer of new and existing second charge mortgages from the Office of Fair Trading’s remit to that of the FSA.

The Government says this is to ensure consistent standards of consumer protection and simplify regulation of the second charge market.

Regulation of the sale and rent-back market will also be extended across all providers under the measures.

The sale and rent-back market was subject to an interim system of FSA regulation from July 2009, and was replaced by a full regime in June 2010.

Yet the Government says feedback from the FSA suggests that many sale and rent back transactions are still taking place outside regulation.

Treasury financial secretary Mark Hoban (pictured) says these measures will enhance protection for consumers in the mortgage market.

He says: “Giving the FSA responsibility for the whole residential mortgage market will simplify the mortgage regulation landscape for consumers and lenders. This will ensure that existing second charge mortgage borrowers who fall into arrears or face repossession on both first and second charge mortgages benefit from being regulated by a single organisation, maximising consumer protection and ensuring a more coordinated approach between lenders.

“The measures on mortgage books and sale and rent-back have been introduced to address a genuine gap in the regulatory architecture, and will ensure consumers will be better protected in the mortgage market.”

The Government says it expects the FSA to begin work immediately to implement these measures.

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  1. A great idea – well overdue, 6-7 years to be exact! One problem – the regulator!

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