Q: What type of loan administration is reportable?
A: The trigger for reporting any potential loan administration activities is whether a firm has an authorisation for loan administration. So here, assuming the society has such an authorisation, it potentially needs to complete sections G and H of MLAR:
- However if it only administers its own loan book, and doesn't have any off-balance sheet loans to administer, then it merely ticks box G0, and does not complete sections G1 and G2 or table H.
- But if it carries out any loan administration for other firms, then this should be reported in table G. This applies irrespective of the regulated status of the other firm. This is because we are interested in the range of loan administration carried out by any firm that is an authorised administrator. For this reason, table G collects information on loan administration, distinguishing between whether it is undertaken as a 'principal administrator' or as an 'other administrator'; and also split by regulated and non-regulated loans.
Q: The firm acts as agent in carrying out specified mortgage administration activities for ABC City Council. From 31 October 2004 it is our understanding that such a City Council, in the capacity of a Registered Social Landlord, is not required to have FCA authorisation or a part IV Permission for either a mortgage lender's activity or a mortgage administrator's activity.
A: In view of this, and the fact that the loans are not deemed to be (nor would appear to be capable of becoming) regulated mortgage contracts and no further advances are allowed by the local authority, we query if there is a requirement for the firm to complete MLAR sections G & H?
On the basis of the information provided, the firm needs to report the loans that are administered for the City Council as follows:
- Report the activity against G1.1b and G1.2b, ie against 'Other firms'
- Report under the Principal administrator role, then
- If the loans are pre 31 Oct 2004, report under non-regulated
- If there are any loans made after 31 Oct 2004, or variations made to existing loans such that a new contract is created, and they are such that they satisfy the conditions of a regulated mortgage contract (see paragraph 4(iv) of Introduction chapter of MLAR Guidance), report under regulated loans.
- Our view is that if the loans made by a Local Authority (LA) are such that they satisfy the conditions of a regulated mortgage contract, then such loans are regulated mortgage contracts, and the LA is carrying on a regulated activity, albeit not one for which it needs to be authorised. If the LA then out sources the administration of these regulated mortgage contracts, then the administrator needs to be authorised to undertake this activity.
- Also you will need to report any loans noted above, under section G2.2, and also in table H.
Q: Firm XYZ provides specialist loan administration services to an authorised lender, and in particular to its special purpose vehicles (SPVs). Who should report on these SPVs in sections G (and H)?
A: The position on reporting is as follows:
- The authorised lender, but only if it is also an authorised administrator, will report its own SPVs at G1.1 c) and G1.2 c) under the 'Principal Administrator' columns, and also in G2.3.
- Assuming the above applies, then XYZ would complete its own MLAR, with entries under the 'Other administrator' columns of section G1. But we think the SPV loans administered should be reported against the SPV entries at G1.1 c) and G1.2 c). This is because they are SPV loans and not on-balance sheet loans of the lender.
- In G2, when reporting several SPVs of the same originating lender, we think it is preferable to aggregate all and report on a single line in G2.3
- If the condition in the first bullet does not apply however, that is the authorised lender is not also an authorised administrator, then the lender is not required to report its SPVs in G1 or G2. Instead, the regulated loans in the SPV will need to be administered by a third party that is authorised as a loan administrator. So if this were XYZ, and assuming XYZ is an authorised administrator, then XYZ would be acting as a 'Principal administrator', and accordingly it would report the SPV loans under the 'Principal administrator' columns of G1 against G1.1 c) and G1.2 c).
Q: When a third party loan administrator reports “number of loans” being administered for Firm A in G1.1, should this be on the same basis as Firm A reports 'numbers of loans' for the same loans in its section E3-6?
A: The answer provided was as follows:
- there is merit in a loan administration firm reporting numbers of loans in section G on the same basis that the lender, for whom loan administration is being conducted, reports them in its own MLAR
- a lender will report numbers of loans in section E
- in section E, where a firm is able to separately record balances on further advances, then a firm will report a count of '1' for the original advance and '1' for the further advance. Similarly if, albeit perhaps rarely, a single charge supports two or more loans, then we would expect a firm to probably report them as '2' (or more) in 'numbers of loans' in section E.
- but the two firms systems might use subtly different approaches to the recording or counting of loans involving further advances and/or where more than one loan to a borrower is secured by a single charge.
- thus there may be good reasons why 'numbers' in Firm A’s section E3-6 do not agree exactly with the 'numbers' reported for the same loans in the loan administrator’s section G1.1
Q: Are the 'bases' for determining 'numbers of loans being administered' in section G1.1 and in section J1.2 column 1 (ie Mortgage Administration activity for the FCA fee tariff measure) the same?
A: This question is about the underlying basis, rather than suggesting that the reported figures would be the same. The figures could not be the same for the simple reason that the number reported in J1.2 column 1 is only half of the number of loans being administered.
The coverage of the FCA fee tariff measure for mortgage administration in section J1.2 column 1 is actually quite different from the coverage of loan administration in section G and, moreover, the number of loans in section G is not defined in terms of first charges:
- the fee tariff measure relates to number of mortgage contracts secured by a first charge, whereas section G relates to loans secured by first or second charges
- for the fee tariff measure of 'the number of contracts being administered', each first charge counts as one contract, irrespective of the number of loans involved. In section G, where a borrower has several loans secured by a single first charge, it is more likely that each loan will be reported separately in the count for 'numbers of loans'
- the fee tariff measure covers residential loans to individuals and corporates, whereas section G only covers residential loans to individuals
- the fee tariff measure covers loans administered by the regulated entity for third parties as well as any loans that the entity has on its own balance sheet, whereas loans in section G relate only to loans administered for third parties.
- the use of the term 'mortgage contract' in the fee tariff measure, is not the same as 'regulated mortgage contract" and covers loan contracts that are regulated or non regulated
- lastly, the fee tariff number of loans to be reported is not the actual number of loans administered: it is actually 50 % of the numbers administered