Mortgage Market to Face Even Tougher Control

On Wednesday, November 25th, the UK Treasury announced its plans on further reformation of the financial system. According to the consultation document published by the Treasury, protection for British mortgage borrowers is to be extended. In the framework of this initiative, the Financial Services Authority (FSA) is to take control over fair treatment of mortgage borrowers who have had their mortgage loans sold to 3rd parties, as well as over buy to let and second-charge mortgages. As a consequence of the financial downturn, many mortgage lenders prefer to sell their mortgages to investors and hedge funds as it helps raise additional funds for lending. The UK Treasury is concerned, however, that hedge funds do not treat mortgage borrowers as fairly as banks and building societies do. That is why, the new initiative is aimed at making investors and hedge funds comply with the same standards as banks and other lending institutions. In the opinion of Ms. Sarah McCarthy Fry, Treasury’s exchequer secretary, the issue of mortgage market regulation has become extremely urgent all over the world in the aftermath of the economic crisis. She added that the major objective of the Treasury is to reform the financial system of the country in such a way that borrowers receive stronger protection, while housing market experiences greater stability. As it has already been said, the Treasury also plans to put second-charge mortgages (loans secured against homes) and buy to let mortgages under control of the Financial Services Authority. Commenting on the initiative, Ms. McCarthy Fry claimed that the Treasury wants to provide borrowers with such a level of protection that would allow avoiding repossessions. The discussion of the proposed initiative will last till February, 15th 2010. There is no clear answer at the moment, whether the measures will be accepted or not, as the consultation document was met with mixed response.