The U.K. Treasury announced proposals to extend the Financial Services Authority (FSA) regulation to buy-to-let, second charge mortgages as well as unregulated third parties that have bought mortgages.

According to FSA data, 32% of securitized mortgages are currently unregulated. Around half of these were originated prior to mortgage regulation in October 2004 and will remain unregulated.

Second charge mortgages — which exist in low proportions in selected nonconforming pools — are currently regulated by the Office of Fair Trading (OFT) and a transfer to the FSA is unlikely to entail much change in their servicing, said Deutsche Bank analysts.

“For buy-to-let mortgages a change may be more significant as the main aim appears to be to protect the financial system from losses; this would presumably be achieved by more conservative buy-to-let origination, thus limiting refinance options and keeping buy-to-let RMBS prepayments low,” said Deutsche Bank analysts.

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