Mortgage Law
Mortgage lenders & the Mortgage Code
In 1995 the Council of Mortgage Lenders started work on developing a Mortgage Code to complement the Banking Code of 1994. With the likelihood of a Labour General Election win in 1997, the Council wanted to put out a sign that the industry was taking steps to regulate itself, as Labour had expressed an intention to review the way in which mortgages were sold.
When they assumed power the Mortgage Code was introduced by the Council, but discussions immediately turned to how to extend the Code to mortgage intermediaries. The Mortgage Code remained in force until 31 October 2004, when it was superseded by the Financial Services Authority's Mortgage Conduct of Business rulebook.
Mortgage Conduct of Business Rules
These rules rule the relationship between borrowers and lenders in UK mortgages. They were issued by the Financial Services Authority in 2003 and apply to Regulated Mortgage Contracts which are entered into after the date of 31st October 2004. This is a loan on the security of a first legal mortgage in the UK on land which at least 40% is used in connection with a household by the person borrowing (an individual or trustee).
The Mortgage Conduct of Business Rules was created to increase the quality of information to consumers and help customers in making decisions in mortgages.
These regulations cover:
- Selling of mortgages
- Financial promotion
- Communication
- Advising and selling conduct
- Information disclosure
- Duty to retain records
- Duty to fairly treat consumers
- Equity release schemes
- Arrears and possessions
- Charges
- Calculation of the yearly rate of percentage
- Calculation of total charge for credit
The Mortgage Conduct of Business Rules must be respected by every business that is involved in home finance activity (mortgage contract, home purchase plan, home reversion plan), and may be a mortgage lender, administrator, advisor or arranger.
Mortgages and Home Finance: Conduct of Business Sourcebook
From 6 April 2007, the FSA has also been given the responsibility to regulate the sale of home purchase plans (arrangements for home finance which are compliant with Islamic law) and home reversion plans. Therefore, the FSA has re-named MCOB as the Mortgages and Home Finance: Conduct of Business Sourcebook, though it will still be commonly known as "MCOB".
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