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Status: You are viewing the version of the handbook as on 2009-03-31.

MCOB 5.5 Provision of illustrations

Timing

MCOB 5.5.1RRP
  1. (1)

    A firm must provide the customer with an illustration for a regulated mortgage contract before the customer submits an application for that particular regulated mortgage contract to a mortgage lender, unless an illustration for that particular regulated mortgage contract has already been provided.

  2. (2)

    A firm must provide the customer with an illustration for a regulated mortgage contract when any of the following occurs, unless an illustration for that regulated mortgage contract has already been provided:

    1. (a)

      the firm makes a personal recommendation to the customer to enter into one or more regulated mortgage contracts, in which case an illustration must be provided at the point the recommendation is made (and illustrations for all recommended regulated mortgage contracts must be provided), unless the personal recommendation is made by telephone, in which case the firm must provide an illustration within 5 business days;

    2. (b)

      the firm provides written information that is specific to the amount that the customer wants to borrow on a particular regulated mortgage contract; or

    3. (c)

      the customer requests written information from the firm that is specific to the amount that the customer wants to borrow on a particular regulated mortgage contract, unless the firm does not wish to do business with the customer.

  3. (3)

    Subject to MCOB 5.5.4 R, the firm may comply with (1) and (2) by providing an offer document containing an illustration, if this can be done as quickly as providing an illustration.

MCOB 5.5.2GRP

The effect of the requirements at MCOB 5.3.1 R and MCOB 5.5.1 R(1) is that if a customer's application to enter into a regulated mortgage contract with a mortgage lender, made via a mortgage intermediary, is subsequently passed by that mortgage intermediary to another mortgage lender, then the mortgage intermediary must ensure that the application is amended and the customer is provided with an illustration for the other mortgage lender's regulated mortgage contract before the application is passed to the other mortgage lender.

MCOB 5.5.3GRP

If a firm chooses to issue an offer document in place of an illustration in accordance with MCOB 5.5.1 R(3), it will need to comply with MCOB 6.4 (Content of the offer document), and in particular with MCOB 6.6 (Offer documents in place of illustrations).

MCOB 5.5.4RRP

A firm must not accept fees, commission a valuation, or undertake any other action that commits the customer to an application until the customer has had the opportunity to consider an illustration.

MCOB 5.5.5GRP

The effect of the requirements at MCOB 5.5.1 R(1) and MCOB 5.5.4 R is that a customer will be deemed to be committed to an application if, for example, he pays a product related fee (including a valuation fee) or provides electronic or verbal authority to process an application. It is not necessary for a customer to provide a mortgage lender with a completed application form to submit an application for a regulated mortgage contract.

MCOB 5.5.6G

Subject to MCOB 5.5.1 R and MCOB 5.5.15 R when an illustration is requested without delay, a firm may perform an internal credit score and obtain information on the customer's credit record from a credit reference agency (subject to the consent of the customer), in order to provide a customer with an approval in principle for a regulated mortgage contract, without having to provide an illustration.

MCOB 5.5.7RRP

The firm dealing directly with the customer is responsible for ensuring compliance with the content and timing requirements, that is, a mortgage lender is not responsible for ensuring that a customer has received an illustration before accepting an application from a mortgage intermediary.

MCOB 5.5.8RRP

Where a firm has already provided an illustration in accordance with MCOB 5.5.1 R and the terms for the proposed regulated mortgage contract are subsequently materially altered, the firm must ensure that the customer is provided with a revised illustration, before acting on the amendment, when the change occurs at the point at which a customer submits an application for the regulated mortgage contract.

MCOB 5.5.9GRP

What constitutes 'materially altered' requires consideration of the facts of each individual case. For example, a change of product such that the underlying terms and conditions of the regulated mortgage contract have changed should normally be regarded as material, as would an additional charge, such as a higher lending charge, applying to the regulated mortgage contract when it did not previously.

MCOB 5.5.10GRP

Unless the customer requests a revised illustration, a firm is not required to provide one if the customer has already submitted an application, and an amendment is made subsequently. The mortgage lender should however ensure that any amendment is reflected in the offer document.

Uncertainty whether a mortgage is regulated

MCOB 5.5.11RRP
  1. (1)

    If, at the point an illustration must be provided in accordance with MCOB 5.5.1 R, a firm is uncertain whether the contract will be a regulated mortgage contract, the firm must:

    1. (a)

      provide an illustration; or

    2. (b)

      seek to obtain from the customer information that will enable the firm to ascertain whether the contract will be a regulated mortgage contract.

  2. (2)

    Where (1)(b) applies, an illustration must be provided, unless, on the basis of the information the customer provides, the firm has reasonable evidence that the contract is not a regulated mortgage contract.

MCOB 5.5.12GRP

If the firm has reasonable evidence that the contract is not a regulated mortgage contract and has not provided an illustration before a customer submits an application, and it is subsequently found that the contract is a regulated mortgage contract, there is no requirement to provide a separate illustration at that stage. However, the requirement to integrate an illustration into the offer document at MCOB 6.4.1 R will apply.

No preference between repayment and interest-only

MCOB 5.5.13R

If the customer expresses no preference between a repayment mortgage and an interest-only mortgage, the firm must:

  1. (1)

    provide an illustration for a repayment mortgage (except where the firm does not provide repayment mortgages, in which case it must provide only an illustration for an interest-only mortgage); and

  2. (2)

    make the customer aware that it has provided the illustration on this basis.

Providing an illustration without delay in response to a customer request

MCOB 5.5.14GRP

Where the customer requests written information from the firm that is specific to the amount that the customer wants to borrow on a particular regulated mortgage contract under MCOB 5.5.1 R(2)(c), the purpose of MCOB 5.5.15 R, MCOB 5.5.16 R and MCOB 5.5.17 G is to ensure that the customer receives an illustration without unnecessary delay. These requirements do not restrict the information that the firm may obtain from the customer after it has provided the customer with an illustration.

MCOB 5.5.15RRP

In meeting a request under MCOB 5.5.1 R (2)(c), the firm must not delay the provision of the illustration by requesting information other than:

  1. (1)

    the information necessary to personalise the illustration in accordance with MCOB 5.6.6 R, if the firm does not already know it;

  2. (2)

    where the firm acts in accordance with MCOB 5.5.11 R(2), such information as is necessary to ascertain whether or not the contract will be a regulated mortgage contract;

  3. (3)

    where the regulated mortgage contract involves any linked deposits and the firm chooses to provide an example in the illustration in accordance with MCOB 5.6.109 R(2) or MCOB 5.6.110 R(2), or both, such information as is necessary to produce the example;

  4. (4)

    where the interest rates, payments or any other terms and conditions to be included in the illustration are dependent on the customer's credit record, such information as is necessary to produce an illustration;

  5. (5)

    where the firm includes a quotation for any tied products or compulsory insurance in the illustration, such information as is necessary to produce those quotations;

  6. (6)

    where the customer agrees to receive a quotation for insurance in the illustration (other than that provided for in (5)), such information as is necessary to produce those quotations; and

  7. (7)

    any of the following information where it affects the availability of the regulated mortgage contract that the customer has requested information on or affects the information to be included in the illustration:

    1. (a)

      whether the customer is a first-time buyer, a subsequent buyer moving home or entering into a regulated mortgage contract without moving home;

    2. (b)

      whether the regulated mortgage contract is required for a right-to-buy purchase or for a shared ownership purchase;

    3. (c)

      whether the customer needs to self-certify his income;

    4. (d)

      the location of the property to be purchased, where known; and

    5. (e)

      whether the terms are dependent on a third party guarantee.

MCOB 5.5.16RRP

Where MCOB 5.5.15 R(4) applies:

  1. (1)

    a firm must ask the customer relevant questions about his credit history or obtain information on his credit record from a credit reference agency;

  2. (2)

    a credit reference agency must not be used unless:

    1. (a)

      it would be quicker than asking the customer the relevant questions about his credit history; or

    2. (b)

      the customer is not able to provide sufficient information on his credit history.

MCOB 5.5.17GRP

A firm may use information that it already holds on the customer for the purpose of producing the illustration (for example, if it already holds the customer's credit record), providing the use of this information does not delay the customer receiving the illustration and the customer's consent is obtained where appropriate.

MCOB 5.5.18RRP

If, on the basis of the information obtained from the customer or on the basis of information that the firm already holds on the customer, the firm would do business with the customer, but not on the terms requested, the firm may provide the customer with an illustration in respect of a different regulated mortgage contract if it chooses to do so.