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MCOB 9.3 Pre-application disclosure

MCOB 9.3.1R
  1. (1)

    MCOB 5.1 to MCOB 5.5 (with the modifications stated in MCOB 9.3.2 R to MCOB 9.3.12 R) apply to a firm where the home finance transaction is an equity release transaction, except that those provisions that by their nature are only relevant to regulated mortgage contracts do not apply to home reversion plans (see MCOB 9.1.2A G).3

    3
  2. (2)

    The table in MCOB 9.3.2 R shows how the relevant rules and guidance in MCOB 5 must be modified by replacing the cross-references with the relevant cross-references to rules and guidance applicable to equity release transactions.4

    4
  3. (3)

    The table in MCOB 9.3.3 R replaces certain rules and guidance in MCOB 5 with rules and guidance from MCOB 9.3 and MCOB 9.4.

  4. (4)

    The table in MCOB 9.3.4 R disapplies certain rules in MCOB 5 for the purposes of MCOB 9.

  5. (5)

    The terms that by their nature are relevant only to regulated mortgage contracts must be replaced with the appropriate equivalent terms and expressions for home reversion plans.3

MCOB 9.3.1AG

3The provisions in this sourcebook that apply to home reversion plans should be read in a purposive way. This means that firms should substitute equivalent home reversion terminology for lifetime mortgage terminology, where appropriate. Examples of terms and expressions that must be replaced are 'loan' or 'amount borrowed', which should be replaced with 'amount released' or 'amount to be released', as appropriate, and 'mortgage lender' and 'mortgage intermediary' which should be replaced with 'reversion provider' and 'reversion intermediary'.

MCOB 9.3.2R

Table of modified cross-references to other rules.

This table belongs to MCOB 9.3.1 R.

Subject

Rule or guidance

Reference in rule or guidance

To be read as a reference to:

Variations

MCOB 5.1.3R(2)

MCOB 7

MCOB 7 as modified by MCOB 9

Part of loan not an equity release transaction2

2

MCOB 5.1.9G

MCOB 5.6.6R(2)

MCOB 9.4.6R(2)

Waiver of provisions

MCOB 5.1.10G

MCOB 5.6

MCOB 9.4.

Purpose

MCOB 5.2.1G

MCOB 5

MCOB 5 as modified by MCOB 9

Applying for a lifetime mortgage2

2

MCOB 5.3.2G

MCOB 5.6.26R and MCOB 5.6.27R

MCOB 9.4.26R and MCOB 9.4.27R

4Messages to be given when providing information on equity release transactions

MCOB 5.4.18AR (1)

MCOB 5.4.18AR (1)(a)

MCOB 4.7A.2 R

MCOB 4.4A.1R (1), MCOB 4.4A.2 R and MCOB 4.4A.4R (1)

MCOB 8.5A.2 R

MCOB 4.4A.1R (1), MCOB 4.4A.2 R and MCOB 4.4A.4R (1), each as applied by MCOB 8.3.1 R in modified form

4Messages to be given when customer requests an execution-only sale

MCOB 5.4.18BR (1)

MCOB 4.8A.14R (1) to MCOB 4.8A.14R (3)

MCOB 8.6A.4R (2)

4Guidance relevant to messages given to customer

MCOB 5.4.18C G

MCOB 5 Annex 1

MCOB 9 Annex 1 R for a lifetime mortgage; MCOB 9 Annex 2 R for a home reversion plan.

Tied products

MCOB 5.4.24G

MCOB 5.6.74R

MCOB 9.4.73R or MCOB 9.4.160R3

4Provision of illustrations: timing

MCOB 5.5.1 R (2)(e)

MCOB 4.8A.14R (1), (2) or (3)

MCOB 8.6A.4R (2)

Issue of offer document in place of illustration

MCOB 5.5.3G

MCOB 6.4 and MCOB 6.6

MCOB 6.4 and MCOB 6.6 as modified by MCOB 9

Customer's credit record

MCOB 5.5.16R

MCOB 5.5.15R(4)

MCOB 9.3.12R(3)

MCOB 9.3.3R

Table of rules in MCOB 5 replaced by rules in MCOB 9: This table belongs to MCOB 9.3.1R

Subject

Rule(s) or guidance

Rule(s) or guidance replaced by:

Accuracy of the illustration

MCOB 5.4.2R - MCOB 5.4.7G

MCOB 9.3.5R - MCOB 9.3.10G4

Providing anillustration

MCOB 5.5.15R -

MCOB 9.3.12R -

Content ofillustration

MCOB 5.6

MCOB 9.4

MCOB 9.3.4R

Table of rules in MCOB 5 which do not apply to MCOB 9: This table belongs to MCOB 9.3.1R.

Subject

Rule(s)

Business loans and loans to high net worth mortgage customers: tailored provisions4

MCOB 5.7

MCOB 9.3.5R

An illustration on a particular equity release transaction issued by, or on behalf of an equity release provider, must be an accurate reflection of the costs of the equity release transaction.3

3
MCOB 9.3.6R

A mortgage intermediary must take reasonable steps to ensure that an illustration which it issues, or which is issued on its behalf, other than that provided by a mortgage lender:

  1. (1)

    is accurate within the following tolerances:

    1. (a)

      no more than one percent or £1, whichever is the greater, below the actual figures charged by the mortgage lender for the following:

      1. (i)

        the total amount payable in Section 15 of the illustration;

      2. (ii)

        the amounts that the customer must pay by regular instalment (where payments are required), or the amounts of interest charged, in Section 8 of the illustration; and

      3. (iii)

        the amount by which the regular instalment, or the estimated amount owed, would increase following a one percentage point increase in interest rates in Section 9 of the illustration.

    2. (b)

      the APR in Section 15 of the illustration cannot be understated by more than 0.1%; and

  2. (2)

    except in the case of conveyancing fees and insurance premiums (where estimates may be used), is accurate in respect of other figures quoted in the illustration including fees payable to the mortgage lender or mortgage intermediary in Section 11 and cash examples of early repayment charges, calculated in accordance with the rules at MCOB 9.4.83 R to MCOB 9.4.88 R, in Section 13.1

MCOB 9.3.6AR

3A reversion intermediary must take reasonable steps to ensure that an illustration which it issues, or which is issued on its behalf, other than that provided by an reversion provider, is accurate, except in the case of conveyancing fees and insurance premiums (where estimates may be used).

MCOB 9.3.7G

Given that the APR is presented as a percentage, and must be rounded to one decimal place in accordance with MCOB 10 (Annual Percentage Rate), firms should note that the tolerance allowed for the APR in MCOB 9.3.6 R(1)(b) means that, for example, where the actual APR is 5.0%, the quoted APR must be no lower than 4.9%, or where the actual APR is 16.0%, the quoted APR must be no lower than 15.9%.

MCOB 9.3.8G

There are no restrictions on figures which are quoted as higher than those actually charged by the equity release provider3 although this should not be purposely done in order to make one equity release transaction3 look more expensive than another.

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MCOB 9.3.9G

It is the responsibility of an equity release intermediary3 to ensure an illustration is accurate.3 However, where a firm can show that it was reasonable for it to rely on information provided to it by another person, other than the equity release provider, he may be able to rely on that person (see MCOB 2.5.2 R).3

3
MCOB 9.3.10G

An offer document may not always exactly match the illustration provided before application even when the equity release3 requirements have not changed. For example, where a fixed rate has a defined end date, the total amount payable may be different because the number of payments at the fixed rate has reduced, or the estimated amount of interest to be charged has changed, assuming a later date at which the lifetime mortgage 3will start.

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MCOB 9.3.11R

[deleted]4

344
MCOB 9.3.12R

In meeting a request an illustration in relation to a particular equity release transaction (see MCOB 5.5.1 R (2)(d))4, the firm must not delay the provision of the illustration by requesting information other than:

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  1. (1)

    the information necessary to personalise the illustration, if the firm does not already know it;

    3
  2. (2)

    where the firm is uncertain whether the transaction will be an equity release transaction,3 such information as is necessary to ascertain this;3

    3
  3. (3)

    where the interest rates, payments (if required) 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;

  4. (4)

    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; and

  5. (5)

    where the customer agrees to receive a quotation for insurance in the illustration (other than that provided for in (4)), such information as is necessary to produce those quotations