The CML have now published a note on the CML Handbook landing page advising that on 26th April 2014, new mortgage market rules come into force.
The CML have advised that there may be some impacts on individual conveyancing transactions as a result.
The three main points to be aware of are as follows:
1. Where no formal mortgage offer has been issued, in effect where the application has not been fully underwritten by the lender, as at 26th April 2014 (e.g., the case has only been given an Agreement In Principle/Decision In Principle by the lender) then the case will have to be underwritten using the new responsible lending rules ( some lenders such as Virgin Money may have already implemented these rules prior to formal MMR implementation). Theoretically this could delay the issuing of offers as the the case would have to be looked at through the new lending rules.
2. Where a formal mortgage offer has been issued as at 26th April 2014, i.e. the application has been fully underwritten, the case can proceed to completion provided no material change occurs in relation to affordability between offer and completion. The case proceeds as normal.
3. Should a material change occur in relation to affordability between mortgage offer and completion the lender will have to reassess the case using the new MMR responsible lending rules and decide if they wish to continue with the offer, amend it or withdraw it. There are some specific instances of what constitutes a material change in the MMR rules, however, outside of these; lenders will have differing policies about what constitutes a material change in terms of their lending policies.
Lenders will be managing their pipeline cases in different ways and will have individual requirements/materiality thresholds in relation to processing changes to mortgage applications.
As well as the above, there will be a more detailed and prescribed advice process for lenders when advising potential borrowers. Under the new rules, the majority of sales will be advised – in particular, interactive sales where there is a spoken or interactive dialogue with the consumer during the sale will be deemed to be advised.
It remains to be seen if there will be any CML Part 2 changes in light of the new MMR rules.
Further information can be found here.