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MCOB 6.4 3Mortgages: content 3 of the offer document

MCOB 6.4.1R
  1. (1)

    If a firm offers to entering into a regulated mortgage contract with a customer, it must provide the customer with an offer document containing an illustration.

  2. (2)

    The firm's offer in the offer document must be on the basis of the information set out in the illustration provided in accordance with (1).

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Records

MCOB 6.4.3R
  1. (1)

    A firm must make an adequate record of each offer document which it issues to a customer in accordance with MCOB 6.

  2. (2)

    The record required by (1) must be retained for a year from the date that the offer document is issued to the customer.

  3. (3)

    If, in accordance with MCOB 6.5 (Information to be provided in the offer document or separately), information is included in a separate document that is sent with the offer document, that information must also be retained as part of the record required by (1).

Modifications to the illustration

MCOB 6.4.4R

The illustration provided as part of the offer document in accordance with MCOB 6.4.1 R (1) must meet the requirements of MCOB 5.6 (Content of illustrations) with the following modifications:

  1. (1)

    the illustration must be suitably adapted and revised to reflect the fact that the firm is making an offer to a customer and updated to reflect changes to, for example, the interest rate, charges, the exchange rate or the APR required by MCOB 10 (Annual Percentage Rate), at the date the illustration is issued;

  2. (2)

    MCOB 5.6.2 R (2) (a) does not apply;

  3. (3)

    MCOB 5.6.15 R (Information to be included at the head of the illustration) does not apply;

  4. (4)

    MCOB 5.6.16 R (Section 1: 'About this illustration') is replaced by the following: "Section 1: 'About this offer document':Under the section heading 'About this offer document', the following text must be included:

    1. (a)

      'You are not bound by the terms of this offer document until [insert relevant circumstances, including the names of any documents that must be signed. For example "you have signed the legal charge and the funds are released for your mortgage"]. We are required by the Financial Conduct Authority (FCA) - the independent watchdog that regulates financial services - to provide you with this offer document.'; and

    2. (b)

      (unless MCOB 6.6.1 R applies)"You should compare this offer document with the key facts illustration given to you before you applied for this mortgage, to see how the details may have changed.'";

  5. (5)

    Unless (b) applies, MCOB 5.6.17 R (Section 2: 'Which service are we providing you with?') is replaced with the following:"Section 2: 'Which service did we provide you with?'

    1. (a)

      Under the section heading 'Which service did we provide you with?' the following text should be presented as two options each with a 'check box', one of which must be marked prominently to indicate the level of service provided to the customer:'We have recommended, having assessed your needs, that you take out this mortgage. We have not recommended a particular mortgage for you. You must make your own choice whether to accept this mortgage offer.'";

    2. (b)

      If the service described in MCOB 5.6.17 R (Section 2: 'Which service are we providing you with?') was provided by another firm, MCOB 5.6.17 R is replaced by the following:"Section 2: 'Which service were you provided with?'Under the section heading 'Which service were you provided with?' the following text should be presented as two options each with a 'check box' one of which must be marked prominently to indicate the level of service provided to the customer:'[name of firm] recommended that you take out this mortgage.[name of firm] did not recommend a particular mortgage for you. You must make your own choice whether to accept this mortgage offer.'";

  6. (6)

    MCOB 5.6.29 R (2) does not apply;

  7. (7)

    MCOB 5.6.52 R to MCOB 5.6.53 G is replaced by the following:Where all or part of the regulated mortgage contract is an interest-only mortgage, the illustration in the offer document must:

    1. (a)

      clearly state that the payments on the regulated mortgage contract cover only interest, and not the capital borrowed; and5

    2. (b)

      [deleted]5

      5
    3. (c)

      include a statement reminding the customer to check regularly the performance of any investment used as a repayment strategy5, to see whether it is likely to be adequate to repay the capital and, where applicable, pay the interest accrued 5 at the end of the term of the regulated mortgage contract;

      5
  8. (7A)

    The illustration may state the repayment strategy the customer intends to use.5

  9. (8)

    the fees recorded in the illustration that is part of the offer document in accordance with MCOB 5.6.66 R (1) must include any fees paid or payable by the customer;1

  10. (9)

    MCOB 5.6.69 R (5) is replaced by the following:'(where the fee is payable or has been paid to the mortgage lender), whether or not the fee is refundable, and if so, the extent to which it is refundable;'

  11. (10)

    [deleted]2

    2
  12. (11)

    where additional features are included in accordance with MCOB 5.6.92 R and these are credit facilities that meet the definition of a regulated credit agreement6 regulated by the Consumer Credit Act 1974 and the Act6, the relevant parts of Section 12 of the illustration that is part of the offer document must include the following text:"This credit facility is regulated under the Consumer Credit Act 1974 and the Financial Services and Markets Act 20006. Please refer to the separate credit agreement which describes the facility and the terms on which the credit is available";

  13. (12)

    The text required by MCOB 5.6.102 R (2) (a) or (b) should be adapted to include, or tell the customer where they can find, the information required by MCOB 6.5.4 R; and

  14. (13)

    MCOB 5.6.113 R applies to the illustration that is part of the offer document if the illustration given out in accordance with MCOB 5 (Pre-application disclosure) was issued by, or on behalf of, a mortgage intermediary.

MCOB 6.4.5G
  1. (1)

    One consequence of MCOB 6.4.4 R(5)(b) is that the mortgage lender will need to know, for each individual transaction arranged by a mortgage intermediary, whether or not the customer has received advice from that mortgage intermediary.

  2. (2)

    When complying with MCOB 6.4.4 R(5)(b), mortgage lenders may wish to include a statement after the level of service in Section 2 confirming that the level of service described was given by another firm, and explaining that they, as the mortgage lender, are not responsible for the level of service given, and that the customer should contact the other firm if they have any queries about the level of service provided. For example: "If you have any queries about this service, you should contact [Name of firm]. [Name of lender] is not responsible for the advice or information you received."

MCOB 6.4.6R

In adapting and revising the illustration that is part of the offer document in accordance with MCOB 6.4.4 R(1) a firm must:

  1. (1)

    avoid amending the format of the information required by MCOB 5.6 (Content of illustrations) where possible, since this could result in the illustration in the offer document being difficult to compare with the illustration originally provided to the customer in accordance with MCOB 5.5.1 R;

  2. (2)

    use, where possible, the same headings, ordering of information, and language that appeared in the illustration provided in accordance with MCOB 5.6 (Content of illustrations); and

  3. (3)

    only change section headings where necessary (for example 'What you have told us' could be renamed 'Your mortgage requirements').

MCOB 6.4.7R

In adapting and revising the illustration in accordance with MCOB 6.4.4 R(1), a firm may:

  1. (1)

    add extra information at the beginning and end of the illustration, such as conditions which are not covered by the illustration;

  2. (2)

    include greater detail within each of the specified sections than that included in an illustration provided in accordance with MCOB 5 (Pre-application disclosure); and

  3. (3)

    leave blank, except for the text 'not applicable', sections that are irrelevant, such as:

    1. (a)

      the section on insurance (see MCOB 5.6.73 R to MCOB 5.6.83 G), where the customer is not buying insurance from the firm and the firm does not require insurance to be in place; and

    2. (b)

      the section and sub-sections on additional features (see MCOB 5.6.92 R to MCOB 5.6.112 G) if there are no additional features available.

MCOB 6.4.8G

Examples of the additional information that should be included in the offer document in accordance with MCOB 6.4.7 R (1) or MCOB 6.4.7 R (2) is information about any retentions or reinspections that will be required by the firm.

MCOB 6.4.9R

A firm must ensure that the illustration forms the main, and an integral, part of the offer document.

MCOB 6.4.10G

MCOB 6.4.9 R prevents a firm from preparing a separate illustration and simply adding it to the existing material provided to the customer at the offer stage.

Other information contained in the offer

MCOB 6.4.11R

A firm must ensure that the offer document contains a prominent statement:

  1. (1)

    of the period for which the offer is valid;

  2. (2)

    explaining, where the regulated mortgage contract contains features, such as additional unsecured borrowing facilities, which could result in the customer borrowing more money, that where such features are used, the amount of the customer's debt will increase;

  3. (3)

    explaining when any interest rate change on the regulated mortgage contract takes effect. This statement must be used, for example, to explain cases where an annual review system is used;

  4. (4)

    explaining the consequences that might arise from the customer not entering into the regulated mortgage contract, including any fees that the customer has paid which will not be reimbursed;

  5. (5)

    explaining that once the regulated mortgage contract is concluded there will be no right of withdrawal; and

  6. (6)

    explaining that although no right of withdrawal exists the customer will have a right to repay the regulated mortgage contract in accordance with the terms of the regulated mortgage contract.

MCOB 6.4.11AR

5If the illustration provided by the firm to the customer does not state the repayment strategy the customer intends to use, as permitted by MCOB 6.4.4 R (7A), that information must be included in the offer document.

MCOB 6.4.12G

In complying with MCOB 6.4.11 R (6) the firm is not required to repeat in this section of the offer document the cash amounts of the early repayment charges set out in the illustration provided as part of the offer document. The firm may instead insert a reference to the relevant section of that illustration.

MCOB 6.4.13R

A firm must ensure that the contact details section of the offer document (as required by MCOB 5.6.122 R) also includes information on how to complain to the firm about the services provided by the firm in relation to the regulated mortgage contract and whether or not complaints may subsequently be referred to the Financial Ombudsman Service.

MCOB 6.4.14G

DISP 14 requires a firm to deal promptly and fairly with complaints, including 4referring to another firm complaints4 about that other firm's services.

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MCOB 6.4.15G

In addition to the information required by MCOB 6.4.13 R, a firm may include information about how to complain to any other firm about the services that firm provided to the customer in relation to the regulated mortgage contract. For example, where the customer received advice from another firm, a mortgage lender may include contact details for the firm that provided the advice.

MCOB 6.4.16R

If the firm knows at the point that the offer is made to the customer that its interest in the regulated mortgage contract will be assigned (by sale or transfer) and the firm will no longer be responsible for setting interest rates and charges, the offer document must:

  1. (1)

    state this; and

  2. (2)

    state, where known, who will be responsible for setting interest rates and charges after the sale or transfer.

MCOB 6.4.17R

Where MCOB 6.4.16 R applies, if the name of the party who will be responsible for setting interest rates and charges after the sale or transfer is not known at the point the offer is made, the firm must notify the customer of this as soon as it becomes known.

MCOB 6.4.18G

MCOB 6.4.16 R and MCOB 6.4.17 R could apply where the ownership of a regulated mortgage contract is transferred to a third party through securitisation.