The Mortgage Credit Directive (MCD) will be implemented on the 21^st March 2016.  The final rules for the MCD have been issued and can be read in full by clicking here:

The Mortgage Credit Directive Final Rules PS15/9 

Buy to Let Mortgages – implementing the Mortgage Credit Directive PS15/11

 
Further to our previous Bulletins on the implementation of the Mortgage Credit Directive, this bulletin contains further information on how Lenders are going to prepare for the Directive in terms of using the KFI plus or ESIS documentation, and what their key dates for these processes will be. I have also covered some further information around Consumer Buy to Let and how Lenders will begin to identify these transactions within the mortgage application systems.
 
Lender updates on the Mortgage Credit Directive
As we move towards 21^st March 2016 Lenders are preparing their systems and processes so that from day 1 they have compliant documentation. Unlike the MMR where Lenders were given certain timescales to implement the new rules, the MCD gives no breathing space and all documentation will immediately change on 21^st March 2016. The MCD has allowed Lenders to adopt some of the rules early and we are starting to see many of the providers in the UK announce their intentions of what documentation and system amendments they will be making.  To keep abreast of these changes Paradigm have developed a matrix which you can view here to show you these key areas. This is an on-going document and will be updated regularly each time a Lender shares with us their changes. We hope you find this as a useful reference point.
 
Consumer Buy to Let changes
From 21^st March 2016 Buy to Let ceases to be captured under the Consumer Credit Regulation. All buy to let transactions including the new consumer buy to let transactions will be considered as non-regulated mortgages.
 
The new Consumer Buy to Let  (CBTL) category will have some extra supervision by the FCA and this is because the UK Government feel that these client’s need some extra protection that this supervision will bring. The definition of a CBTL is where a client is NOT purchasing an investment property with the intention purely for business purposes and they or their immediate family may have lived at the property previously. This may capture the following types of transactions; Let to buy, First time Landlords and in some cases inherited properties. An existing or experienced landlord can never be a CBTL client. Lenders will be deciding via their application processes what constitutes a CBTL or an Investment Property Loan (IPL). 

The Council of Mortgage Lenders have put together two flowcharts that help with that decision tree and these can be seen by clicking on the below links courtesy of the Association of Mortgage Intermediaries. You can use the below charts to follow through some example clients that you may have now to see which ones may fall into the CBTL transaction.

The flowchart for house purchase transactions
The flowchart for re-mortgage transactions

Firms will need to decide whether they will be carrying out CBTL transactions for clients and they will need to apply for a new FCA permission for Consumer Buy to Let. This CBTL permission is available to apply now for via the FCA connect online variation of permissions system. There is an application fee of £100 and an on-going flat fee charge to be set around £250 per firm. 

Best regards,
Christine Newell
Mortgages Technical Director
Paradigm Mortgage Services LLP