EMCD is a European directive to introduce a single regulatory framework market for mortgages customers.

The new rules are effective from 21 March 2016; however, firms can begin to introduce the reforms before this date.

We’ve highlighted some of the rules and our approach to these proposals.

  • EMCD implementation dates
    At Kent Reliance, we think it is important to manage the change as soon as possible to minimise disruption, so we will implement the rules ahead of the deadline in early 2016. Further information on the date will be communicated nearer the time.
  • ESIS and KFI Plus
    From 21 March 2016 the European Standardised Information Sheet (ESIS) can replace the Key Facts Illustration (KFI), or transitional arrangements can be used to allow the introduction of a KFI with an additional information sheet (to be called KFI Plus).

    Brokers will need to be able to explain the contents of both documents, and be familiar with the illustrated rates and explaining to the customer the importance of reading and understanding the document. As with KFI today, the document must be issued at the point of recommendation.

    Kent Reliance will introduce the KFI Plus from early 2016. Further information and guides on the changes will be provided nearer the time.
  • Introduction of the 7 Day reflection period
    Once an offer has been issued, a new 7 day reflection period will be clearly stated and all lenders will be obliged to give customers a seven day grace period to consider completing on the mortgage advance. Customers can choose to waive this reflection period but will need to do this formally.
  • Will all mortgage offers be binding?
    Yes, all regulated mortgage offers will be binding unless a material change occurs.
  • The impact of EMCD on MMR
    EMCD removes some of the transitional arrangements around the exceptions to affordability and interest only rules imposed by MMR.

    We will implement our own policies to demonstrate and assess appropriate affordability.
  • A new category of Consumer Buy to Let is being introduced
    Under the new rules an appropriate regulatory framework for Consumer Buy to Let loans is being introduced. This means that these loan types will be fully governed by the FCA. We will publish further information in regard to our definition of Consumer Buy to Let nearer to the time, but we will be accepting these application types. The majority of BTL mortgages will remain an unregulated Business Buy to Let as is today.
  • EMCD includes Second Charge Lending
    EMCD brings the second charge market under the remit of the FCA, and therefore full MCOB and EMCD compliance is required on all Second Charge lending, when its purpose is to buy or retain rights on residential property. As such our brokers will require FCA permissions and we will apply MCOB regulation to our assessment and treatment of both new and back book Second Charge loans.
  • Foreign currency loan changes
    EMCD rules apply a range of requirements on what could be deemed a foreign currency loan, including the need to disclose any fluctuation in exchange rate if it is more than 20%.

    We will not accept or offer foreign currency loans.
  • Information on alternative increased borrowing options
    Where a customer is increasing their borrowing, brokers will be required to inform them of other ways to raise funds. Suitability will only need to be explored should the broker intend to offer any of the suggested alternatives to the customer.
  • Disclosure of lenders on panel and fees paid

    The EMCD looks to encourage transparency and brokers will be required, if requested by the customer, to disclose the lenders on panel and the procurement fees paid to them.

  • Re-definition of an independent firm
    Under the new rules, a firm is only independent when it recommends all products from the relevant market. For example the rules will restrict firms who do not offer bridging or second change services from calling themselves ‘independent for the residential market’.
  • Restrictions on ‘tying’ products together
    Where financial services products are available separately and are not an integral part of the mortgage contract the EMCD restricts firms from bundling other products together with the mortgage. The exception is for products where the only purpose is to provide additional security to the lender.

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