ALBA 2007 – 1 plc - Irish Stock Exchange

REGULATION OF THE UK RESIDENTIAL MORTGAGE MARKET
The following summary of certain regulatory considerations does not discuss all aspects of applicable
legislation and other authorities which may be important to prospective investors.
Until 31 October 2004, mortgage business in the United Kingdom was self-regulated under the
mortgage code (the "Mortgage Code") sponsored by the Council of Mortgage Lenders (the "CML")
and policed by the Mortgage Code Compliance Board (the "MCCB"). Membership of the CML and
compliance with the Mortgage Code were voluntary. The Mortgage Code set out a minimum standard
of good mortgage practice. Since 30 April 1998, lender-subscribers to the Mortgage Code were not
able to accept mortgage business introduced by intermediaries who were not registered with the
appropriate self-regulatory body, which was (before 1 November 2000) the Mortgage Code Register of
Intermediaries or (on and from 1 November 2000 until 31 October 2004) the MCCB.
On and from N(M), rules and regulations came into force under the FSMA in relation to the regulation
of mortgages; the FSA is the regulator under this regime.
The scope of mortgage regulation is set out in the Financial Services and Markets Act 2000 (Regulated
Activities) Order 2001 (SI 2001/544), as amended.
The following activities: (i) entering into as lender; (ii) administering; (iii) arranging; and (iv) advising
on regulated mortgage contracts (including arranging and advising on variations to such contracts),
together with agreeing to do any of these activities, are regulated activities under the FSMA. On and
from N(M), a mortgage contract is a regulated mortgage contract if, at the time it is entered into: (a)
the borrower is an individual or trustee; (b) the contract provides for the obligation of the borrower to
repay to be secured by a first legal mortgage on land (other than timeshare accommodation) in the
United Kingdom; and (c) at least 40 per cent. of that land is used, or is intended to be used, as or in
connection with a dwelling by the borrower or (in the case of credit provided to trustees) by an
individual who is a beneficiary of the trust, or by a related person. A variation of a Mortgage Loan
may also fall within the regime insofar as, on or after N(M), such variation amounts to a new contract
(and otherwise satisfies the definition of regulated mortgage contract).
Each entity carrying on a regulated activity under the FSMA, unless an exception is available, is
required to hold authorisation and permission from the FSA to carry on that activity. If requirements as
to authorisation of lenders, brokers and other intermediaries (in relation to the carrying on of regulated
activities under the FSMA concerning entering into a regulated mortgage contract) are not complied
with, the regulated mortgage contract is unenforceable against the borrower except with the approval of
a court. Generally, each financial promotion relating to a regulated mortgage contract (or other credit
agreement secured by a mortgage on land, where the lender carries on the regulated activity of entering
into regulated mortgage contracts) has to be issued or approved by a person holding authorisation and
permission from the FSA. If such requirements as to financial promotions are not complied with, the
regulated mortgage contract (or other credit agreement) is unenforceable against the borrower except
with the approval of a court. In particular, an unauthorised person may arrange for an authorised
person to administer its regulated mortgage contracts but, if that arrangement comes to an end, that
unauthorised person may commit an offence if it administers the contracts for more than one month
beginning with the day on which that arrangement comes to an end, although this will not render the
contracts unenforceable against the borrower.
Failure to comply with requirements as to authorisation and as to the issue and approval of
advertisements is a criminal offence.