Connect mortgage academy
Liz Syms, the CEO of Connect for Intermediaries, delves into the peculiar intricacies of buy-to-let (BTL) regulations, emphasising the pressing need for a comprehensive overhaul. During our informative sessions at the Connect Mortgage Academy, where we mould aspiring BTL mortgage advisers, we delve into the labyrinthine world of mortgage regulations and the nuanced permissions involved in advisory roles.
The intricacies of BTL regulations often elude the understanding of many advisers until they are explicitly addressed. Notably, business BTL falls outside the purview of regulation by the Financial Conduct Authority (FCA), presenting an intriguing scenario where virtually anyone could venture into establishing their BTL mortgage advisory business without regulatory constraints or necessary qualifications.
Yet, the seemingly straightforward path takes a twist as most BTL lenders baulk at considering applications from advisers not affiliated with regulated companies.
Certain lenders stipulate that advisers, at the very least, must possess consumer credit permissions from the FCA to navigate the terrain of non-FCA-regulated BTL transactions. Astonishingly, more than half of the lenders in the BTL market go a step further, demanding advisers to hold comprehensive residential FCA-regulated permissions.
Consequently, a predicament arises wherein numerous commercial brokers equipped only with consumer credit permissions find themselves incapacitated to offer advice on BTL mortgages from prominent lenders like BM Solutions, The Mortgage Works, and even Kent Reliance. This regulatory conundrum underscores the need for a sweeping reassessment and modernisation of the existing BTL regulatory framework.
This critical aspect warrants the attention of industry professionals and regulatory bodies. Connect Mortgage Academy certainly had a lot to take in during this session.
Connect mortgage academy | Lender Criteria for Buy-to-Let (BTL) Mortgages
It’s essential to be aware of the distinct regulatory considerations when dealing with Buy-to-Let (BTL) mortgages. There are two main categories of regulated BTL, each with its specific requirements.
The first category is consumer BTL, which mandates a separate Financial Conduct Authority (FCA) permission for advisory services due to the implementation of the Mortgage Credit Directive (MCD). Consumer BTL typically involves ‘accidental landlords’—individuals who have inherited a property or decided to lease out a property they once lived in. However, the situation becomes intricate, as properties let out for business purposes may fall outside consumer BTL regulation. Lenders’ criteria vary, meaning an advisor may need FCA permission with one lender for this type 
of advice but not with another.
The second category is family BTL, where the property is leased to an immediate family member. This scenario requires comprehensive regulated residential mortgage permissions.
It’s crucial for advisors to navigate these distinctions carefully, considering the specific lender’s criteria and regulatory requirements. Additionally, understanding the nuances of client situations, such as accidental landlords and family BTL arrangements, is paramount to providing accurate and effective advice in the diverse landscape of BTL mortgages. This was an invaluable lesson for the Connect Mortgage Academy learning programme.
Connect Mortgage Academy | Capital quirks
Connect Mortgage Academy now understand capital raising also has its quirks.
Capital raising exhibits peculiarities that may surprise many individuals. While it may seem logical that obtaining a loan secured against one’s primary residence necessitates fully regulated permission, there are intriguing exceptions.
If funds are acquired for ‘business purposes,’ they fall outside the realm of regulation. Consider a scenario where a client has a first-charge loan on their home but desires to leverage the equity for business-related investments, such as acquiring equipment.
Surprisingly, if they establish a second charge on their residence for this purpose, the loan remains unregulated. Furthermore, depending on the lender’s policies, the adviser may not require regulation either.
The intricacies extend beyond this point. Advisers engaged in commercial mortgage transactions might need FCA consumer credit permission if clients are purchasing property in their personal name. However, no such permission may be necessary if the client opts for a limited company structure.
These peculiarities find their roots in the Mortgage Credit Directive (MCD), a framework initially driven by the European Union. The looming question arises: post-‘Brexit,’ will the Financial Conduct Authority (FCA) address and rectify these anomalies? The resolution of such uncertainties remains a topic of interest in the financial landscape.
We’ve ended our discussion on “Connect Mortgage Academy | Extraordinary Crazy Regulation Quirks of Buy-to-Let Need Overhauling.”