UK PRA Private Mortgage Guarantees

On Oct. 26, UK PRA issued private mortgage guarantee scheme policy.

  • UK PRA published statement on the regulatory treatment of retail residential mortgage loans under private mortgage insurance schemes with similar contractual features to the Mortgage Guarantee Scheme (MGS), aims to help firms assess their compliance.
  • Follows UK PRA Apr. 2021 statement on regulatory treatment of loans, see #103243.
  • Background
  • In Apr. 2021 PRA issued statement on treatment of retail residential mortgages under MGS, is aware that there are mortgage insurance schemes with similar features.
  • Where an insurer in the private sector guarantees a portion of the first losses net of recoveries on retail residential mortgage loans that are eligible for the schemes.
  • Statement
  • Does not provide exhaustive commentary of regulatory requirements for such loans.
  • PRA approach to capital in MGS statement is applicable to private mortgage insurance schemes, approach to notification, disclosure, reporting requirements also extended.
  • Approach to significant risk transfer notification same as for loans under MGS, as is that re private securitization notification, must submit one notification of scheme size.
  • Issued direction for rule modification by consent to permit firms to benefit from this.
  • PRA noted potentially disproportionate burdens re disclosure, reporting requirements.
  • Will not enforce use of regulatory disclosure templates if firms provided to holder of guaranteed position information substantively same as that prescribed by templates.
  • Regulatory Reporting
  • Firms may consider burden associated with reporting C14 and C14.01 templates under Reporting (CRR) part of the PRA Rulebook for each mortgage unduly burdensome.
  • PRA therefore suggests that firms should consider applying for a modification by consent to report on an aggregated basis for private retail mortgage securitizations.
  • Issued direction for such modification by consent, firms who believe they meet the requirements should contact Waivers and Permissions Team with suitable request.
  • Next Steps
  • PRA expects firms to assess their compliance and where not compliant develop and implement remediation plans to ensure compliance by no later than Apr. 30, 2024.

Regulators UK PRA
Entity Types Bank; BS; CNSM; Ins; MG Orig; Servicer
Reference PS 10/26/2022; Citation: Reporting (CRR);
Functions Accounting; Compliance; Financial; Operations; Reporting; Risk; Treasury; Underwriting
Countries United Kingdom
Products Banking; Insurance; Loan; Mortgage; Securitization
Regions EMEA
Rule Type Final
Rule Date 10/26/2022
Effective Date 4/30/2024
Rule Id 151755
Linked to Rule :103243
Reg. Last Update 10/26/2022
Report Section UK

Last substantive update on 10/27/2022