FIN. TeamFCA has written a Dear CEO letter to firms that enter into regulated second charge mortgage contracts, asking them to review their lending processes and confirm to FCA that the firm is acting responsibly when lending and has systems, processes and controls to ensure this.
FCA is worried, following a review it carried out to assess firms’ compliance with the MCD, that second charge lenders had tried to adapt their pre-MCD and MCOB practices to make them compliant, but that their practices often lacked appropriate due diligence to assess the plausibility of the conclusions on affordability they reached. It was also concerned that firms did not properly assess income for self-employed customers, nor did they use realistic assumptions when assessing monthly expenditure. Finally, it noted that quality assurance and oversight arrangements could not always identify unaffordable loans and associated risks, and did not take appropriate measures to protect themselves against financial crime risks by checking the authenticity of documents.
The confirmation is due by 1 May 2018.
