Regulator set to oversee specialist mortgage firms

From next month specialist mortgage providers are to come under the control of the Financial Regulator.

Beginning on February 1st, companies including Start Mortgages, GE Money, Nua Homeloans, Springboard and Stepstone, not currently regulated by the authority, will be required to register and apply for authorisation to operate in Ireland.

Traditionally, the regulator could only supervise lenders that offered deposit facilities for customers, such as banks and building societies. However, following the introduction of the Markets in Financial Instruments and Miscellaneous Provisions Act 2007, at the end of last year, other retail credit firms have come under the authority's remit. And firms which offer home reversion products, which allow a homeowner to sell all or part of his home in return for extra income or a lump sum while remaining in the home, will also be regulated.

The specialist mortgage companies, which offer higher interest loans to people turned down by traditional lenders, will have until April 30th to register, after which it will be an offence to operate without approval.

The regulator will then be able to apply the Consumer Protection Code to these firms. Under the code, firms must only offer or recommend products suitable for the consumer, based on their individual circumstances, including their ability to repay. They must explain why a recommended loan meets the consumer's needs and can not offer unsolicited pre-approved credit. They must also have procedures for handling arrears cases and where a mortgage is offered to consolidate other loans, they must provide a comparison of the cost of continuing with the existing loans and of the consolidated loan.

The regulator will have the power to inspect the companies to ensure they are meeting all of the criteria set out in the code.

A spokeswoman for the Financial Regulator said the authority is currently consulting with those affected by the new legislation.

The Money Advice and Budgeting Service has welcomed the introduction of regulation.

Meanwhile, David Ingram, chief executive of Start Mortgages, said the move would promote the best interests of the consumer, as well as the orderly growth of the specialist mortgage market.