Mortgage Regulation

Since 31 October 2004 the sale of mortgages has been overseen by the City watchdog, the Financial Services Authority (FSA). Mortgage regulation brought some important changes for consumers. BBC News explains what protection mortgage regulation offers.
What does regulation mean for me
Regulation should offer a better safety net for consumers.
This is because anyone who wants to sell mortgages, from estate agents to mortgage brokers, must be authorised by the FSA or be part of an FSA-authorised network.
In addition, they must adhere to a raft of rules governing sales.
Businesses that fail to comply with the new regime could be forced to stop trading, risk a fine or even a prison sentence.
But the regulatory rules are not retrospective.
They will only apply to mortgages and variations to existing mortgages that came into force after 31 October 2004.
How has the sales process changed
Under the regulatory regime there is an important distinction between information and advice sales.
If you sign up for an information-only sale you will receive information about products, but no advice.
An information sale is only suitable for someone who is certain of the mortgage they want, as only borrowers who sign up to advice-based sales can seek redress at the Financial Ombudsman Service (FOS).
At the point of all sales, consumers now receive a summary document which illustrates the key features of the mortgage, known as a "Key Facts" document.
This is aimed at helping people shop around and making the process more transparent.
Salesmen are required to disclose any commissions they are getting and, whether they deal with the whole market or just one lender.
If giving advice, advisers have to consider whether you can afford the mortgage, in an attempt to stem irresponsible lending.
What about seeking redress if it all goes wrong or the firm goes bust
The Financial Services Compensation Scheme has been extended to cover mortgage sales.
The scheme is a safety net for consumers, which steps into offer compensation when financial firms go bust.
In addition, people will be able to take their complaint to the FOS.
Is the system fool-proof
Unfortunately not.
It''s a big improvement, but there are still a range of "holes" which could catch out unsuspecting consumers.