Mortgage advisers are struggling to cope with lenders’ many different interpretations of the client disclosure documents required under the EU Mortgage Credit Directive (MCD).
The MCD is due to be implemented by the FCA on 21 March, with one of the main changes being an update of the information sheets that customers receive when applying for a mortgage.
While existing regulation means that lenders and brokers are better prepared than many on the continent, the new rules will replace the Key Facts Illustration (KFI) with the new European Standardised Information Sheet (ESIS).
Lenders must begin using the ESIS by 21 March 2019, but until then they can continue to issue a KFI or KFI plus to provide the same level of information as an ESIS.
There is no prescribed format for the offer document under MCD, which means banks and building societies have been free to produce their own versions within the regulatory framework.
Simon Gammon, managing director of Knight Frank’s in-house broking service, said the problem was that every bank and building society had a different approach to complying with the new rules.
He said this had resulted in brokers having to memorise all the different approaches in order to ensure they continue to give good advice.
He said: “We have compiled a spreadsheet of all the different interpretations, and have managed to get on top of it because we’ve got the manpower, but for smaller advisers it is going to be a bumpy ride to begin with.
“Properly training brokers is going to be really important between now and March. It is boring, but crucial to remaining compliant.”
Jeremy Duncombe, director of Legal & General’s Mortgage Club, said they had worked hard with lender partners over the past few months to pull together a live-updated MCD Matrix and hub to provide a one-stop-shop for brokers with information on the regulation, along with the rules lenders are enforcing, and when.
The FCA’s technical mortgage specialist, Keith Hale, has previously described the EU rules as adding little consumer benefit to an already tightly regulated UK industry, post the 2014 Mortgage Market Review.
Last May he warned advisers to brace themselves for a “three-year period of flux”, adding they would need to get used to issuing different disclosure documents for different clients from different lenders.
In terms of the regulator’s approach to mortgage applications which straddle the 21 March implementation date, it confirmed this would be a commercial decision for individual lenders.