This chapter applies to a firm in a category listed in column (1) of the table in MCOB 6.1.2 R in accordance with column (2) of that table.

This chapter applies with respect to an offer made by a firm to a customer with a view to the firm:

1. (1)

   entering into a home finance transaction;3

   3
2. (2)

   varying the terms of a home finance transaction3 entered into by the customer in any of the following ways:

   3
   1. (a)

      adding or removing a party;

   2. (b)

      making a further advance; or

   3. (c)

      switching all or part of the regulated mortgage contract from one interest rate to another;1

(whether or not the customer agrees to enter into the home finance transaction3 or variation).

In relation to a lifetime mortgage3, this chapter, MCOB 6, is modified by MCOB 9 (Equity release3: product disclosure).2

In MCOB 6, a reference to an offer to enter into a home finance transaction3 is to be read as including a reference to an offer to vary an existing home finance transaction3 in a manner specified in 3this section3 if the context so requires.

Any communication required by MCOB 6 to be provided to a customer by a firm must be in a durable medium.

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).

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).

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;

   2. (b)

      state the repayment vehicle the customer intends to use where the firm knows details of the specific repayment vehicle from the application by the customer; if the firm does not know how the customer intends to repay the capital borrowed, the firm must clearly state that the repayment vehicle is unknown, and must provide the customer with a clear reminder of the need to put suitable arrangements in place; and

   3. (c)

      include a statement reminding the customer to check regularly the performance of any investment used as a repayment vehicle, to see whether it is likely to be adequate to repay the capital at the end of the term of the regulated mortgage contract;

8. (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

9. (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;'

10. (10)

    [deleted]2

    2
11. (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";

12. (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

13. (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.

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').

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.

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

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.

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.

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.

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.

If a firm makes an offer to a customer with a view to entering into a regulated mortgage contract, it must provide the customer, along with the offer document, with a tariff of charges that could be incurred on the regulated mortgage contract.

If the regulated mortgage contract has any linked borrowing or linked deposits, details of the charges on these linked facilities, for example charges payable on a linked current account, must be included in the firm'stariff of charges.

If a firm makes an offer to a customer with a view to entering into a regulated mortgage contract that includes a mortgage credit card, it must provide the customer with information explaining that the card will not give the customer the statutory rights associated with traditional credit cards.

If a firm makes an offer to a consumer2 with a view to entering into a regulated mortgage contract which is a distance contract, it must provide the consumer2 with the following information with the offer document:

1. (1)

   the EEA State or States whose laws are taken by the firm as a basis for the establishment of relations with the customer prior to the conclusion of the regulated mortgage contract;

2. (2)

   any contractual clause on law applicable to the regulated mortgage contract or on competent court, or both;

3. (3)

   the language in which the contract is supplied and in which the firm will communicate during the course of the regulated mortgage contract; and

4. (4)

   if not provided previously:

   1. (a)

      all of the contractual terms and conditions of the regulated mortgage contract to which the offer document relates; and

   2. (b)
      1. (i)

         an appropriate status disclosure statement (compliant with GEN 4) for the mortgage lender;4

         4
      2. (ii)

         the mortgage lender's Firm Reference Number3; and

         3
      3. (iii)

         confirmation that the customer can check the Financial Services Register on the FCA's website www.fca.org.uk/firms/systems-reporting/register or by contacting the FCA on 0800 111 6768.

If a firm provides a customer with an offer document in place of an illustration in accordance with MCOB 5.5.1 R (3), it must take reasonable steps to ensure that it provides the offer document in accordance with the requirements for providing an illustration in MCOB 5.4 (Illustrations: general) and MCOB 5.5 (Provision of illustrations).

1. (1)

   Where the regulated mortgage contract is for a business purpose, a firm may choose to provide a customer with a business offer document instead of the offer document referred to in MCOB 6.4.1 R.

2. (2)

   If a firm provides a customer with a business offer document in accordance with (1), it must ensure that:

   1. (a)

      an updated business illustration, as required by MCOB 5.7 (Pre-application disclosure for business loans), forms part of the business offer document; and

   2. (b)

      subject to the tailoring required by MCOB 5.7 (Pre-application disclosure for business loans), the business offer document complies with MCOB 6.4 (Content of the offer document).

1. (1)

   1If a firm offers to enter into a home purchase plan with a customer, it must ensure that the customer is, or has been provided with an appropriate offer document in a durable medium which includes:

   1. (a)

      the period for which the offer is valid;

   2. (b)

      an explanation of the consequences that might arise from the customer not entering into the home purchase plan including details of any fees that the customer has paid which will not be refunded;

   3. (c)

      an explanation of when the customer will become bound by the offer and the implications of this;

   4. (d)

      the charges that a customer may incur under the plan, including the reason for, and amount of, each charge, when they are payable, whether they will be refunded and, if so, when;

   5. (e)

      a financial information statement;

   6. (f)

      the firm's contact details, including its name and address; and

   7. (g)

      how to complain to the firm and whether or not complaints may subsequently be referred to the Financial Ombudsman Service.

2. (2)

   A firm may omit details of the charges that a customer may incur under a home purchase plan from the offer document if they are included in a separate tariff of charges provided to the customer at the same time.

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

1. (1)

   A firm must communicate to a consumer2 the distance marketing information in a durable medium available and accessible to the consumer2 in good time before the consumer2 is bound by any distance contract or offer to enter into a home purchase plan.

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2. (2)

   If the distance contract or offer has been concluded at the consumer's2 request using a means of distance communication2 which does not enable providing the information in accordance with (1) then it must be communicated no later than immediately after the conclusion of the home purchase plan.

   2

1A SRB agreement provider must not enter into aregulated sale and rent back agreement unless it follows the process outlined in this section.

1. (1)

   A SRB agreement provider intending to enter into aspecific regulated sale and rent back agreement with a SRB agreement seller and before it complies with the other requirements in this section, must ensure that the property is properly valued by a valuer:

   1. (a)

      that meets the competence and independence requirements (see MCOB 2.6A.12 R, MCOB 2.6A.12A R and MCOB 2.6A.13 E ); and

   2. (b)

      using the definition of "market value" set out in the Valuation Standard of the Royal Institution of Chartered Surveyors from time to time.

2. (2)

   Where the SRB agreement provider has applied to a mortgage lender for financing for a proposed regulated sale and rent back agreement and the relevant lender in accordance with its standard lending practices requires its own valuation of the property to be carried out, the valuation will only satisfy the requirements of (1) if the property is properly valued by a valuer that meets the competence and independence requirements (see MCOB 2.6A.12 R and MCOB 2.6A.13 E).

3. (3)

   The firm must ensure that a copy of the valuation report accompanies the written pre-offer document at Stage One (see MCOB 6.9.3 R).

4. (4)

   This rule does not apply if the SRB agreement seller has already obtained his own recent valuation of the property from a valuer that meets the competence and independence requirements (see MCOB 2.6A.12 R and MCOB 2.6A.13 E).

1. (1)

   As soon as a SRB agreement provider agrees the key terms of a proposed regulated sale and rent back agreement with a SRB agreement seller and before he becomes contractually committed to enter into the agreement, the SRB agreement provider must provide the seller with a written pre-offer document summarising its key terms (Stage One).

2. (2)

   The written pre-offer document must be in the form prescribed by MCOB 6 Annex 2 R and must be adapted by the firm, as appropriate, to the extent specified.

3. (3)

   The written pre-offer document must be accompanied by the Money Advice Service consumer factsheet on sale and rent back (even if the firm has already provided this) which the firm must provide to the customer in a durable medium and which may be accessed through www.moneyadviceservice.org.uk.

4. (4)

   On providing the Money Advice Service consumer factsheet to the SRB agreement seller, the firm must give him an oral explanation of what it contains, so as to ensure that he understands its contents, unless the firm has already done so.

5. (5)

   The firm must ensure that the written pre-offer document is accompanied by all associated legal documents in draft form that the seller will need to sign at Stage Two (MCOB 6.9.10 R) to give effect to the proposed regulated sale and rent back agreement.

The SRB agreement provider must not instigate any contact or otherwise seek to communicate with the SRB agreement seller or a member of his family for a period of 14 days from the time that he has been supplied with the written pre-offer document at Stage One, together with the associated legal documentation in draft form.

If the SRB agreement seller or a member of his family makes contact with the SRB agreement provider during the 14 day cooling-off period, for example because he wants to query a term of the written pre-offer document, the provider must endeavour to answer the query in as factual a manner as the circumstances permit but avoid any language or conduct which could be interpreted as amounting to an attempt to exert pressure on the SRB agreement seller to enter into the proposed agreement.

The SRB agreement provider must not charge or seek to charge a potential SRB agreement seller for any fee, cost, or expense unless and until the seller has entered into the regulated sale and rent back agreement following the 14 day cooling-off period.

The SRB agreement provider must not offer to or enter into a regulated sale and rent back agreement with the seller until the 14 day cooling off period has elapsed and must not allow the seller to become contractually committed to enter into any such agreement by signing any associated legal documentation to give effect to it within that period.

As soon as a SRB agreement provider has provided the written pre-offer document at Stage One to a SRB agreement seller who is in arrears under his regulated mortgage contract or home purchase plan on the property to which the proposed regulated sale and rent back agreement relates, it must, in a durable medium, immediately notify the mortgage lender, home purchase provider or the providers of other loans that may be secured on the property:

1. (1)

   explaining that the firm is proposing to enter into a regulated sale and rent back agreement with the seller and that, as required by the FCA, he will be given a cooling-off period of 14 days before deciding whether he wishes to enter into the proposed agreement;

2. (2)

   summarising the key terms of the proposed agreement;

3. (3)

   advising the lender or provider that the proposed agreement is likely to be relevant to any repossession action or other forbearance option the lender or provider may already be, or may be contemplating, taking with respect to the property; and

4. (4)

   giving the firm's contact details should the lender or provider wish for any further information.

1. (1)

   No sooner than 14 days after the SRB agreement provider has supplied the SRB agreement seller with the written pre-offer at Stage One, the provider must provide him with a written offer document for signing (Stage Two), accompanied by any formal legal documentation that the parties will need to sign to give effect to the proposed regulated sale and rent back agreement.

2. (2)

   The written offer document for signing (Stage Two) must be in the form prescribed by MCOB 6 Annex 3 R and must be adapted by the firm, as appropriate, to the extent specified.

The SRB agreement provider must keep a record of the written pre-offer document at Stage One and the written offer document for signing at Stage Two for a period of:

1. (1)

   one year after the end of the fixed term of the tenancy under the regulated sale and rent back agreement; or

2. (2)

   five years from the date of the disclosures and warnings, written offer documents and cooling-off period notices;

   whichever is the longer.

1 MCOB 6 Annex 2R - Written Pre-offer Document of a regulated sale and rent back agreement.

1 MCOB 6 Annex 3R - Cooling-Off Document of a regulated sale and rent back agreement.