Dear Financial Conduct Authority,
Please can you tell me:
(a) In the past year the number of organisations the FCA has sanctioned for offering or encouraging house buyers to apply for buy-to-let loans for homes they intend to occupy themselves as a means of avoiding income multiple tests?
(b) A list of those organisations.
(c) To what extent the FCA considers this to be a problem.
(d) What is the FCA doing to discourage this practise?
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The Financial Conduct Authority (FCA)
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Dear Mr Harvey
Freedom of Information: Right to know request FOI3262
Thank you for your request under the Freedom of Information Act 2000 (the
Act), for information regarding buy to let loans (BTL).
Your request has now been considered and I can provide comments to your
questions as follows :
a. In the past year the number of organisations the FCA has sanctioned
for offering or encouraging house buyers to apply for buy-to-let loans
for homes they intend to occupy themselves as a means of avoiding
income multiple tests?
The FCA does not regulate BTL mortgages, so consequently have not
sanctioned any firms for encouraging consumers to enter into BTL
b. A list of those organisations.
c. To what extent the FCA considers this to be a problem.
We completed a review of the misuse of BTL mortgages during 2012. Misuse
may occur where a customer does not meet the lending criteria for a
regulated residential mortgage and fraudulently uses a BTL mortgage
instead. We found that although firms understood the risk of these
mortgages being misused, they did not always appreciate how it applied to
them, or how their systems and controls could be strengthened to guard
against the risk. Most BTL business is generated by the intermediary
market; therefore, it is important that intermediaries understand this
d. What is the FCA doing to discourage this practise?
We expect firms to take steps to ensure that they have appropriate systems
and controls in place to prevent fraudulent mortgage applications.
We have previously communicated that Intermediaries in particular, may
wish to consider the following:
* Is the misuse of BTL mortgages recognised as a risk and who is
responsible for this?
* How should the risk be managed/monitored?
* What improvements can be made to enhance systems and controls?
The FCA will continue to monitor this area and if we find evidence that
unregulated mortgages have been fraudulently used in place of regulated
mortgages, we will take appropriate action.
Associate / Information Access Team / Finance and Operations
Financial Conduct Authority
25 The North Colonnade
Tel: +44 (0)20 7066 9354
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