Mortgage Credit Directive – New Definition of Independence

Under the changes to the Mortgage Credit Directive (MCD) if you want to describe your firm as an Independent Mortgage Intermediary after the implementation of MCD, you will need to demonstrate that you consider second charge lending as well as first charge.

A new rule, MCOB 4.4A.4R (3), states

  • An MCD mortgage credit intermediary must only disclose that it is independent if its consideration of MCD regulated mortgage contracts across the market is unlimited. 

MCD regulated mortgage contracts includes second charge lending.

You may already have received an MCD data collection questionnaire from the FCA or will receive one shortly. You will need to complete this using the FCA Connect system.

One of the questions will ask if you intend to ‘do second charge mortgage business.’ As stated above, to use the term ’independent’ you will need to consider second charge loans as an option. To be independent your client files will need to evidence that second charge was considered and recommended if most suitable for the client. 

This applies to mortgage business only. The current independence rules for investment business remain unchanged.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

This may not fundamentally change the way you work but you will need to have evidence that you have considered second charge if using the term ‘independent’.

Action Required By You

  1. If you intend to use the term ’independent’ ensure you consider second charge lending as part of your sales process;
  2. Ensure your research demonstrates second charge lending was considered.

ATEB clients should speak with their account manager as necessary; otherwise contact ATEB here to find out how we can help. 

About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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