Mortgage Credit Directive (MCD) What is an European Directive? A - - PowerPoint PPT Presentation

Mortgage Credit Directive (MCD)

What is an European Directive?

• A "directive" is a legislative act that sets out a goal

that all EU countries must achieve

• However, it is up to the individual countries to devise

their own laws on how to reach these goals

What is the Mortgage Credit Directive (MCD)?

• Introduces a European framework of conduct rules
• Covers changes to first charge and second charge mortgages
• Where possible the existing MMR rules have been used
• Comes into operation on 21st March 2016
• Lenders have until March 2019 to finalise their changes

Our Activity for MCD

• We asked all Lenders to complete questionnaires explaining

their position and provided additional pieces of data required to source products correctly

• We collated the answers and made development changes
• MortgageBrain Classic and MortgageBrain Anywhere are

being updated to accommodate requirements

• Discussions took place with Corporates and Networks too

What have we implemented?

• Second charge/Secured Loans now regulated
• Introduction of LoansBrain
• Foreign currency mortgages
• Consumer Buy to Let
• Remortgage registration fee
• Historic APRC
• Additions to existing illustration – KFI
• And of course, the new illustration called ESIS – European

Standardised Information Sheet

What have we changed?

• Both a KFI and an ESIS will be produced from sourcing
• KFI button renamed ‘Illustration’
• Select the document displayed by default in settings
• Option of producing either or both KFI & ESIS
• Easy comparison of products possible as you can show

clients the same documents from different Lenders

Secured Loans

• Previously governed by the CCA – Consumer Credit Act
• Now comes under the MCD directive and regulated
• Only available to be sold through Master Brokers
• Master Broker acts like a packager and is responsible for

issuing ESIS and other supporting documentation

• Broker still retains the responsibility of risk to the

consumer

LoansBrain – Free Second Charge Loan Sourcing website

• Free to use
• No need to register
• Carry out either a quick or a detailed source
• Source and then refer or simply refer your clients' needs
• Supported by Fluent Money, the UK's largest Master Broker
• www.loansbrain.co.uk

Foreign Currency Mortgages

Definition: A mortgage in Sterling (£) for a property in the UK but where either the customer is using funds from a currency other than Sterling to make part or all

• f the payments, or the customer lives outside the UK. So an example might be

someone buying a property in London but who works for an overseas firm and is paid in Euros or Dollars.

• Few Lenders currently offering these products
• Only an ESIS will be produced for a foreign currency

mortgage

• Additional filter on Start Screen & Additional fee in the

scheme details

Consumer Buy to Let

Definition: A new category that ‘accidental’ landlords fall into. Usually as a result of inherited property or where the individual/s concerned were living in the property and have subsequently rented it out rather than sell, i.e., Let to Buy. The landlord will be classed as a Consumer BTL and will enjoy protections through FOS and additional consumer focused precautions.

• Regulated contracts which fall under MCD
• Buy to Let filter will source on Consumer and

Business Buy to let

• Consumer Buy to Let filter will be introduced prior to

21st March 2016 and displayed on the Buy to Let tab

Remortgage Registration Fee

Definition: Mortgage registration fees are the fees charged by the land registry for registering a mortgage on a property. They are national fees that don’t vary between Lenders, but do vary between countries.

• The fee has to be displayed within the ESIS only, but
• nly if the Lender is charging for it
• All countries offer a discount on the fee if it is paid

electronically, so some Lenders will include this as a fee in the ESIS and some will mark it as an unknown fee because of how the Client may pay for it

Remortgage Registration Fee (cont.)

• An additional Country dropdown list has been included
• n the Property tab
• The fee is displayed in the Fees & Rates section
• Also displayed under the APRC reference on the ESIS
• You can choose the country to be defaulted

permanently through Settings

New KFI (previously referred to as KFI+)

• Existing KFI with additional items of data:
• Reflection period - Where an MCD mortgage lender

provides the consumer with a binding offer, it must give the consumer a reflection period of at least seven days.

• APR has been renamed to APRC – Annual Percentage

Rate of Charge

• Historic APRC – The Historic APRC is calculated using

rates based on the difference between the current BBR and the highest BBR value in the last 20 years

ESIS - European Standardised Information Sheet

• Brand new illustration – dynamic sections
• From 21st March 2016, some Lenders will choose to

produce an ESIS, others will continue with a KFI

• To enable an ESIS to be produced, specific wording is

required from the lenders

• Additional Obligations text
• Non Compliance text
• Additional Information text
• Lender Address and Telephone Number

ESIS (cont.)

• Additional information required for an ESIS to be

produced includes:

• Foreign currency
• Tied Savings Product
• Global Fees (Registration Fee)
• Unknown Costs
• Lenders have until March 2019 until they have to solely

produce an ESIS

Illustration Production

• Originally the KFI tab now ‘Illustration’ tab

Changes have been made to the Illustration production to cater for the compilation of an ESIS:

• Details Tab - Client Property Address
• Details Tab - Company Website Address
• Proc Fee Tab - KFI and ESIS Proc Fees are different
• Insurances Tab - includes an entry for tied savings account
• Complaints Tab - You are required to enter the necessary

text which is saved permanently

Illustration Production (cont.)

• Conveyancing Tab - no requirement for a nominal

amount and now allows you to enter a fixed amount

• Foreign Currency Tab - Only appears when quoting a

foreign currency mortgage

• Assumption text – where a Lender has not provided

the required information, there is a disclaimer at the top of the ESIS which covers:

• Additional Obligations
• Other Rights of Borrowers
• Non-Compliance
• Additional Information

Illustration Production (cont)

Items that have been included in the ESIS or repositioned on the KFI are:

• Proc Fee
• Client’s property address
• Value of property
• APRC and Historic APRC
• Reflection period – above Section 1 of KFI

Thank You

If you have any queries please call

• ur Customer Support team on

0208 665 3200

customerservices@mortgage-brain.co.uk