CP16/41: Amendments to Notes for completion of the Mortgage Lenders & Administrators Return (MLAR) — FCA — GB

Consultation Paper | PRA CP45/16
| FCA CP16/41
Amendments to Notes for completion of the MLAR December 2016

Prudential Regulation Authority
20 Moorgate
London EC2R 6DA
Prudential Regulation Authority, registered office: 8 Lothbury, London EC2R 7HH. Registered in England and Wales No: 07854923 Financial Conduct Authority 25 The North Colonnade Canary Wharf London E14 5HS

Consultation Paper | PRA CP45/16
| FCA CP16/41
Amendments to Notes for completion of the MLAR December 2016 The Bank of England and the Prudential Regulation Authority (PRA) reserve the right to publish any information which they may receive as part of this consultation. Information provided in response to this consultation, including personal information, may be subject to publication or release to other parties or to disclosure, in accordance with access to information regimes under the Freedom of Information Act 2000 or the Data Protection Act 1998 or otherwise as required by law or in discharge of our statutory functions. Please indicate if you regard all, or some of, the information you provide as confidential. If the Bank of England or the PRA receives a request for disclosure of this information, the Bank of England or the PRA will take your indication(s) into account, but cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system on emails will not, of itself, be regarded as binding on the Bank of England and the PRA. Please address comments related to both the PRA Notes to the MLAR and the FCA guidance to the MLAR to both authorities at the addresses set out below. For PRA only related changes please e-mail the PRA inbox below. Please send all your comments by Monday 13 March 2017 to:
CP45/16@bankofengland.co.uk and CP16/41@fca.org.uk.
The Financial Conduct Authority (FCA) makes all responses to formal consultation available for public inspection unless the respondent requests otherwise. The FCA will not regard a standard confidentiality statement in an email message as a request for non-disclosure. Despite this, the FCA may be asked to disclose a confidential response under the Freedom of Information Act 2000. The FCA may consult respondents if it receives such a request. Any decision the FCA makes not to disclose the response is reviewable by the Information Commissioner and the Information Rights Tribunal. You can address comments related to questions 5 and 8 of the MLA-D1 or any other FCA related enquiries to the FCA in writing to or via e-mail by Monday 13 March 2017 to:
CP16/41@fca.org.uk.
CP16/41 Christopher Bentley
CP16/41 Strategy and Competition Division Financial Conduct Authority 25 The North Colonnade Canary Wharf London E14 5HS

Contents
1 Overview 5
2 Proposed changes to the PRA’s and FCA’s Notes to the MLAR 5 3 Proposed changes to the PRA’s notes to the MLAR 7 4 Proposed changes affecting the reporting of second charge mortgages to the FCA 8 5 PRA statutory obligations 8 6 FCA statutory obligations 9 7 FCA cost benefit analysis 11 Appendices 12

Amendments to Notes for completion of the MLAR December 2016 5 1 Overview
1.1 In this joint Consultation Paper (CP), the Prudential Regulation Authority (PRA) and
Financial Conduct Authority (FCA) propose updating the PRA’s notes to the Mortgage Lenders & Administrators Return (MLAR), the notes for completion of the MLAR in the Supervision manual (SUP) of the FCA Handbook (henceforth, both notes will be referred to as ‘Notes to the MLAR’ in this CP), and the MLA-D1 form for reporting second charge lending, also in SUP. These changes, amongst other things, are to reflect the changes following transposition of the Mortgage Credit Directive 2014/17/EU (MCD) in the United Kingdom in March 2016. The proposals also include minor clarifications to other sections of the Notes to the MLAR. These clarifications will assist firms in their completion of the MLAR and to remove existing inconsistencies between the PRA and FCA versions of the Notes to the MLAR.
1.2 The proposed updates and clarifications do not introduce any material changes to the
Notes to the MLAR and do not result in any new reporting requirements.
1.3 This consultation is relevant to all firms that submit the MLAR, ie all firms carrying on the
regulated activities of home finance providing activity and administrating a home finance transaction. As a consequence, the changes are relevant to both FCA-only regulated firms and dual regulated firms.
1.4 The policy has been designed in the context of the current UK and EU regulatory
framework. The PRA and FCA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the European Union take effect. 2 Proposed changes to the PRA’s and FCA’s Notes to the MLAR
2.1 This chapter proposes changes to the PRA’s and FCA’s Notes to the MLAR as set out in PRA
Supervisory Statement (SS) 34/151 and the FCA’s SUP 16.12 Annex 19BG in order to provide additional reporting clarifications. The proposed changes are as follows:
 In Section 3: ‘Purpose of reporting requirements’, the information on fee tariff measures should be reported annually, not quarterly. As existing reporting practice is to report this item annually, it is proposed to amend the Notes to the MLAR to reflect this. This proposal represents a change only to the Notes to the MLAR and not to reporting practice.  It is proposed to update Section 4: ‘Regulated mortgage contracts and the wider mortgage market’, sub-Sections 4(i): ‘UK Mortgage Market’, 4(iii): ‘Other secured lending’ and 4(iv):
‘Regulated mortgage contract’ and Section A: ‘Balance Sheet’, sub-Section A3.5: ‘Other loans’, to clarify the treatment of loans and mortgages which are secured on land in the EEA, but outside the United Kingdom. Such loans and mortgages should be reported within ‘Other loans’ within Table A3 of the MLAR return, and should not be reported as ‘Regulated’ lending.  It is proposed to update Section 4: ‘Regulated mortgage contracts and the wider mortgage market’, sub-Section 4(ii): ‘Residential loans to individuals’, to clarify instances of regulated mortgage contracts and non-regulated mortgage contracts within the scope of residential loans to individuals in order to reflect the change in the definition of a

1 ‘Guidelines for completing regulatory reports’, December 2016; www.bankofengland.co.uk/pra/Pages/publications/ss/2016/ss3415update3.aspx.

6 Amendments to Notes for completion of the MLAR December 2016 regulated mortgage contract as a result of the transposition of the MCD in the United Kingdom.  In Section 4(a): ‘Home reversion and home purchase plans’, sub-Section: ‘Guidance to Home Reversion (HR) and Home Purchase Plan (HPP) firms on the completion of the MLAR’, the text refers to a wholesale review of the MLAR, which the Financial Services Authority proposed to undertake under its Better Regulation agenda. As the aim of the Notes to the MLAR is to provide guidance to firms on how to complete the MLAR, the FCA and the PRA are proposing to delete a number of paragraphs in this section as they are now redundant. For reference, the PRA may review the MLAR in due course1, but should there be any changes to the return, they will be consulted upon separately.  It is proposed to amend some text within Section 4b: ‘Sale and Rent Back (SRB) agreement business’ for clarification purposes.  In Section 7: ’Time period’, it is proposed to delete the reference to SUP 16.3.13R as this reference is no longer relevant.  In Section 8: ‘Loans made before 31 October 2004’, sub-Section 8(i): ‘classifying the back book’, it is proposed to note that residential loans to individuals should be classified as non-regulated “for the purposes of the MLAR” to clarify that the Notes to the MLAR are for guidance only.  In Section A: ‘Balance Sheet’, sub-Section ‘Balance sheet analysis’, part ‘A1, A2’, it is proposed to delete the following sentence: ‘However, the differences should only be presentational.’ and replace it with ‘’Loans to customers’ is expected to be the customer balance after any write offs have been taken’ in order to provide additional clarification for reporting purposes. Additions to clarify the reporting requirements are also made to
Section A: ‘Balance Sheet’, sub-Section ‘Balance sheet analysis’, parts ‘A 1.6’, ‘A 1.11’ and
‘A 2.7’.
 In Section D1: ‘Lending-Business Flows and Rates’, sub-Section D1: ‘Loans:
Advances/Repayments – Transactions (columns)’, sub-Section: ‘Write-offs in Quarter’, it is proposed to add the following additional bullet point to clarify the reporting requirement:
‘The amount should be net of any write-backs in the quarter. If there are more write-backs than write-offs, the net figure should be shown as a negative’.  In Section D1: ‘Lending - Business Flows and Rates’, sub-Section D1: ‘Loans:
Advances/Repayments – Transactions (columns)’, sub-Section ‘Other debits/(credits) and transfers (net)’, it is proposed to add the following additional clarification to the NB that balances on loans books should be as at the date of the relevant event, ‘and not be subject to any revaluation factors’.  In Section D1: ‘Lending - Business Flows and Rates’, sub-Section D2: ‘Loans: Book movements’, it is proposed to add the following sentence to section (c) in the FCA Notes to the MLAR and bullet (iii) in the PRA Notes to the MLAR to clarify the reporting:
‘Securitised loans brought back onto the balance sheet in the quarter should also be included and the amount here should be net of them. If the amount of securitised loans

1 See PRA Consultation Paper 46/16 ‘IFRS 9: changes to reporting requirements’ December 2016; www.bankofengland.co.uk/pra/Pages/publications/cp/2016/cp4616.aspx, paragraphs 1.10 – 1.12 for further details about the PRA’s data strategy.

Amendments to Notes for completion of the MLAR December 2016 7 brought back onto the balance sheet is greater than the securitised balance then the net
figure should be reported as a negative; and’.
 In Section D1: ‘Lending-Business Flows and Rates’, sub-Section D2: ‘Loans: Book Movements’, it is proposed to add the following sentence to clarify how non-recourse funding can be established for the purposes of the MLAR: ‘Non-recourse funding can be either established by contract or in-substance’.  In Section F: ‘Lending-arrears analysis’, sub-Section F1 to F4: ‘Arrears categorisation by type of loan’, it is proposed to update ‘balance outstanding’ to ‘customer’s balance outstanding’ to clarify the reporting requirement.  In Section G: ‘Mortgage administration – business profile’, it is proposed to clarify the wording regarding instances where a person is not to be treated as administering a regulated mortgage contract to align the wording with the Financial Services and Markets Act 2000 (FSMA) (Regulated Activities) Order 2001.  In Section J: ’Fee tariff measures’, it is proposed to change the FCA Handbook references to reflect the relevant current sections and to replace ‘appropriate regulator’ with ‘FCA’ to reflect the appropriate fee tariffs requested by the MLAR.  It is proposed to update the definitions of ‘regulated mortgage contract’ and ‘lifetime mortgage’ in Section 4: ‘Regulated mortgage contracts in the wider mortgage market’, sub-Section 4(iv): ‘Regulated mortgage contract’ and Section E: ‘Residential loans to individuals – new business profile’, subsection E6.6: ‘Lifetime mortgages’, to update those definitions in line with the FCA Handbook Glossary. 3 Proposed changes to the PRA’s notes to the MLAR
3.1 This chapter sets out proposed changes to the PRA’s Notes to the MLAR contained in PRA
SS34/15. The changes arise from the transposition of the MCD in the United Kingdom in March 2016, update the Notes more generally following the withdrawal of the FSA Handbook and clarify reporting requirements to align them with changes already made by the FCA in its Notes to the MLAR.
3.2 The changes regard the applicability of Section C of the MLAR to firms which exclusively
carry on home finance activities in relation to second charge regulated mortgage contracts; the effect of the change in the definition of ‘regulated mortgage contract’ to understanding how regulated mortgage contracts and residential loans to individuals in the UK mortgage market interact; and the classification of the backbook for loans made before 31 October 2004. The FCA implemented these changes in FCA PS15/91 and FCA PS16/72.
3.3 The proposed changes described in paragraph 3.2 affect the following sections of the
PRA’s Notes to the MLAR:
 Section 2: ‘Overview of reporting requirements’, sub-Section C: ‘Capital’;

1 ‘Implementation of the Mortgage Credit Directive and the new regime for second charge mortgages, feedback to CP14/20 and final rules’, March 2016; www.fca.org.uk/publications/policy-statements/ps15-9-implementation-mortgage-creditdirective-and-new-regime-second. 2 ‘Future regulatory treatment of CCA regulated first charge mortgages’, March 2016; www.fca.org.uk/publication/policy/ps16-7.pdf.

8 Amendments to Notes for completion of the MLAR December 2016  Section 4: ‘Regulated mortgage contracts and the wider mortgage market’, subSection 4(ii): ’Residential Loans to Individuals’; and  Sections 8: ‘Loans made before 31 October 2004’, sub-Sections 8(i): ‘Classifying the back book’, 8(ii): ‘Specific treatment of residential loans to individuals’, and 8(iii): ‘Further advances made on loans made before 31 October 2004’.
3.4 It is proposed to change Section 4: ‘Regulated mortgage contracts and the wider mortgage
market’, sub-Section 4(iv): ‘Regulated mortgage contract’; Section 4a: ‘Home reversion and home purchase plans’; Section 4b: ‘Sale and rent back business’; and Section E: ‘Residential loans to individuals’, sub-Section 6.6: ‘Lifetime Mortgages’, to clarify that the definitions quoted refer to the definitions in the Glossary of the FCA Handbook.
3.5 It is proposed also to remove the italics in the PRA’s Notes to the MLAR. All terms in the
PRA’s Notes to the MLAR are defined as in the PRA Rulebook, as defined from time to time, except for those terms which are otherwise footnoted or defined in the document. It is proposed to add a sentence to the top of the document to reflect this change.
3.6 The proposed changes referred to in paragraphs 3.1 to 3.5 are set out in Appendix 1 of this
CP.
3.7 These proposals do not represent a change in PRA policy and do not significantly change
the way firms populate the MLAR return.
4 Proposed changes affecting the reporting of second charge mortgages to the FCA
4.1 This chapter sets out proposals to alter the second charge reporting form MLA-D1 to
change the categories for reporting so that they match form MLA-D.
4.2 It is proposed to:
(i) change row 5 of MLA-D1 Second Charge Lending from ‘New Loan’ to ‘House Purchase’; and (ii) add a new row 8 in MLA-D1 named ‘Other’.
4.3 The proposed change to MLA-D1 is not substantial and aligns the second charge lending
form with the equivalent rows contained in form MLA-D.
4.4 The proposed changes do not represent a change in FCA policy, but will provide greater
clarity on where firms should include data in the return and ensure the first charge and second charge data are directly comparable. 5 PRA statutory obligations
5.1 The proposals are compatible with the PRA’s statutory objectives under FSMA to promote
the safety and soundness of firms by facilitating their ability to complete the MLAR report.
5.2 When determining the general policy and principles by reference to which it performs
particular functions, the PRA is legally required, so far as is reasonably possible, to facilitate effective competition in the markets for services provided by PRA-authorised persons in

Amendments to Notes for completion of the MLAR December 2016 9 carrying out regulated activities. The PRA does not consider that the proposals in this CP will either hinder or promote effective competition.
5.3 When determining the general policy and principles by reference to which it performs
particular functions, the PRA must have regard to the regulatory principles. Of particular relevance in this circumstance is the need for the PRA to use its resources in the most efficient way and exercise its functions as transparently as possible. The PRA considers both of these principles to be met in that the proposals clarify the Notes to the MLAR return in the PRA Rulebook, thereby making firms’ reporting submissions more efficient, and that proposals are set out clearly for scrutiny by firms in this joint CP.
5.4 The PRA is required to perform an analysis of the economic impact in respect of proposed
rules. The PRA considers that the costs to firms associated with these proposals will be negligible and therefore a full cost benefit analysis has not been provided.
5.5 The PRA does not consider that the impact of the proposals on mutual societies will be
significantly different from the impact on other firms.
5.6 The PRA may not act in an unlawfully discriminatory manner. It is required, under the
Equalities Act 2010, to have due regard to the need to eliminate discrimination and to promote equality of opportunity in carrying out its policies, services and functions. The PRA does not consider that the proposals give rise to equality and diversity implications. 6 FCA statutory obligations
6.1 This chapter records the FCA’s compliance with a number of legal requirements applicable
to the proposals in our consultation, including an explanation of our reasons for concluding that our proposals are compatible with certain requirements under FSMA.
6.2 When consulting on new rules, the FCA is required by s.138I(2)(d) FSMA to report why we
believe making the proposed rules is (a) compatible with our general duty under s.1B(1) FSMA, so far as reasonably possible, to act in a way which is compatible with our strategic objective and advances one or more of our operational objectives; and (b) our general duty under s.1B(5)(a) FSMA to have regard to the regulatory principles in s.3B FSMA. We are also required by s.138K(2) FSMA to state our opinion on whether the proposed rules will have a significantly different impact on mutual societies as opposed to other authorised persons.
6.3 This chapter also sets out our view of how the proposed rules are compatible with our
duty to discharge our general functions (which include rule-making) in a way which promotes effective competition in the interests of consumers (s.1B(4)). This duty applies in so far as promoting competition is compatible with advancing our consumer protection and/or integrity objectives.
6.4 This chapter includes our assessment of the equality and diversity implications of our
proposals.
6.5 Finally, under the Legislative and Regulatory Reform Act 2006 (LRRA) we are subject to
requirements to have regard to a number of high-level ‘Principles’ in the exercise of some of our regulatory functions and to a ‘Regulators’ Code’ when determining general policies and principles and giving general guidance (but not when exercising other legislative functions like making rules). This chapter sets out how we have complied with requirements under the LRRA.

10 Amendments to Notes for completion of the MLAR December 2016 The FCA’s objectives and regulatory principles: compatibility statement
6.6 The policy proposals and draft guidance in this CP are intended to improve the data we
collect from firms and to clarify to firms how they should report the data to us. The proposals primarily advance our operational objective of securing appropriate levels of consumer protection by helping to ensure we have appropriate and high quality data to supervise the mortgage market.
6.7 These proposals also advance our competition objective because the data we collect will
contribute to our overall understanding of how competition is evolving in the market and help us to identify emerging risks to effective competition without adding any significant costs to firms’ regulatory burden.
6.8 We consider our proposals to be compatible with our strategic objective of ensuring that
the relevant markets function well.
6.9 Further information about how our proposals have regard to the regulatory principles in
s.3B of FSMA is set out below.
The need to use our resources in the most efficient and economic way
6.10 Our proposals should make our supervision function more efficient because the
improved data we will receive and the resulting analysis will allow us to target our resources more effectively. The principle that a burden or restriction should be proportionate to the benefits
6.11 The proportionality of our approach is addressed in the cost benefit analysis (CBA) in
Chapter 7.
The desirability of sustainable growth in the economy of the United Kingdom in the medium or long term
6.12 We do not expect our proposals to have a material impact on economic growth in the
United Kingdom.
The general principle that consumers should take responsibility for their decisions
6.13 Our proposals do not alter the principle that consumers should take responsibility for
their decisions.
The responsibilities of the senior management of persons subject to requirements imposed by or under FSMA, including those affecting customers in relation to compliance with those requirements
6.14 We do not anticipate any impact on senior management requirements as a result of our
proposals.
The desirability, where appropriate, of the FCA exercising its functions in a way that recognises differences in the nature and objectives of the businesses it regulates
6.15 We have had regard to this principle and do not believe our proposals undermine it.
The desirability of publishing information relating to persons subject to requirements imposed under FSMA, or requiring them to publish information
6.16 We have had regard to this principle and do not believe our proposals undermine it.
The principle that we should exercise our functions as transparently as possible
6.17 We consider that improving our guidance for the MLAR will give firms more certainty
regarding our reporting requirements.

Amendments to Notes for completion of the MLAR December 2016 11
6.18 Some of the proposed changes to guidance and the second charge reporting form MLAD1 were influenced by queries we received through our contact centre from firms. We have
acted on these queries and, as part of the consultation process, are providing the industry and other stakeholders the opportunity to comment on the proposed changes. Expected effect on mutual societies
6.19 We do not expect the proposals in this paper to have a significantly different impact on
mutual societies than on other authorised persons or present them with any more or less of a burden than other authorised persons. Compatibility with the duty to promote effective competition in the interests of consumers
6.20 In preparing the proposals as set out in this consultation, we have had regard to our duty
to promote effective competition in the interests of consumers. Equality and diversity
6.21 We are required under the Equality Act 2010 to ‘have due regard’ to the need to
eliminate discrimination and to promote equality of opportunity in carrying out our policies, services and functions. As part of this, we conducted an equality impact assessment to ensure that the equality and diversity implications of any new policy proposals were considered.
6.22 Overall, the FCA does not believe that the proposals in this CP adversely impact any of
the groups with protected characteristics specified in legislation i.e. age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment.
6.23 The FCA will continue to consider the equality and diversity implications of the proposals
during the consultation period, and, if necessary, will revisit them when the final policy is published. Legislative and Regulatory Reform Act 2006
6.24 We have had regard to the principles in the LRRA for the parts of our proposals that
consist of general policies, principles or guidance. Through the contact centre we have engaged with firms and have taken into account their feedback when drafting the proposed changes to the guidance notes for the MLAR. We consider the proposals in this CP are proportionate and will advance our operational objectives, in particular securing an appropriate degree of consumer protection and promoting effective competition in the interests of consumers. Firms also have a chance to comment on our proposals through engagement in this consultation process and once our final policy is published firms will be given greater clarity about the MLAR reporting requirements. 7 FCA cost benefit analysis
7.1 S.138I(2)(a) of FSMA requires us to publish a CBA when proposing draft rules. S.138L(3) of
FSMA provides that s.138I(2)(a) does not apply where we consider that there will be no increase in costs or the increases will be of minimal significance. Having assessed the changes proposed in this CP and having considered previous estimates of similar reporting changes, we believe there will be no or a minimal increase in costs as a result of the proposals.

12 Amendments to Notes for completion of the MLAR December 2016 Appendices 1 Appendix 1: Notes for completion of the Mortgage lenders & administrators return (MLAR) available at www.bankofengland.co.uk/pra/Pages/publications/cp/2016/cp4516.aspx 2 Appendix 2: Amendments to the Supervision manual (SUP) available at www.bankofengland.co.uk/pra/Pages/publications/cp/2016/cp4516.aspx

NOTES FOR COMPLETION OF THE MORTGAGE LENDERS & ADMINISTRATORS RETURN (‘MLAR’) Note: This document is being consulted on as part of PRA Consultation Paper 45/16 and FCA Consultation Paper 16/41 issued on Monday 12 December 2016; available at www.bankofengland.co.uk/pra/Pages/publications/cp/2016/cp4516.aspx. New text is underlined and deleted text is struck-through. Contents Introduction: General notes on the return
Section A: Balance Sheet Section
Section B: Profit & Loss Account
Section C: Capital
Section D: Lending: Business Flows & Rates
Section E: Residential Lending to Individuals: New Business Profile
Section F: Lending: Arrears Analysis
Section G: Mortgage Administration: Business profile
Section H: Mortgage Administration: Arrears analysis
Section J: Fee tariff measures
Section K: Sale and rent back business
Section L: Credit Risk
Section M: Liquidity

This document should be read in conjunction with the definitions in the PRA Rulebook, except for those terms which are otherwise footnoted or defined in the document. INTRODUCTION: GENERAL NOTES ON THE RETURN

Introduction
This section covers a number of points that have relevance across the return generally:

Overview
Purpose of reporting requirements
Regulated mortgage contracts and the wider mortgage market
Home Reversion plans and Home Purchase plans
Sale and rent back business
Accounting conventions
Accuracy
Time period
Loans made before 31 October 2004
Specific items:
(i) positions to be reported gross
(ii) foreign currencies

Overview of reporting requirements
The data requirements for firms carrying on the regulated activities of home finance providing activity and administering a home finance transaction consist of quarterly, half yearly and annual information. This guidance deals only with the quarterly requirements, however, which are referred to as the Mortgage Lenders and Administrators Return (MLAR). Because the MLAR is activity based, not all sections are applicable to all types of home finance activity firm. The applicability of each section is explained in the
table below:

Section Applicability:
A1 and A2: Balance sheet Applies to all home finance activity firms except:

A firm that is required to submit a balance sheet by
a lower numbered regulated activity group, as described in rule 2.3 of the regulatory reporting part of the PRA Handbook.
An incoming EEA firm (note a)
A3: Analysis of loans to customers
Applies to all home finance activity firms B1: Income statement Applies to all home finance activity firms except:
A firm that is required to submit an income
statement by a lower numbered regulated activity group, as described in rule 2.3 of the regulatory reporting part of the PRA Rule book.
An incoming EEA firm (note a)
B2: Provisions analysis Applies to all home finance activity firms C: Capital Applies to all home finance activity firms except:
A firm that is required to submit a capital
adequacy data item by a lower numbered regulated activity group, as described in rule
2.3 of the regulatory reporting part of the
PRA Rulebook.
An incoming EEA firm (note a)
A firm which is a solo-consolidated subsidiary of
an authorised credit institution
A firm which exclusively carries on home
finance activities in relation to second charge regulated mortgage contracts, as set out in SUP 16.12.18BR (note 4). D: Lending: business flows and rates Applies to all firms with permission to undertake a home finance providing activity except:
SRB agreement providers1
SRB administrators2
E: Residential lending to individuals: new business profile Applies to all firms with permission to undertake a home finance providing activity except:
SRB agreement providers
SRB administrators

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/66391/06-03-2016. 2 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/66389/06-03-2016.

Section Applicability:
F: Lending: Arrears
Analysis
Applies to all firms with permission to undertake a home finance providing activity except:

SRB agreement providers
SRB administrators
G: Mortgage
Administration: Business
Profile
Applies to all firms with permission to undertake administering a home finance transaction, except:
SRB administrators
H: Mortgage
Administration: Arrears analysis
Applies to all firms with permission to undertake administering a home finance transaction, except:
SRB administrators
J: Fee tariff measures Applies to all home finance activity firms K: Sale and rent back business Applies to SRB agreement providers and SRB administrators L: Credit risk Applies to a firm that meets the conditions of SUP 16.12.18BR (note 2) in the FCA’s Handbook. M: Liquidity Applies to a firm that meets the conditions of SUP 16.12.18BR (note 3) in the FCA’s Handbook. Note (a): Credit Institutions passporting under CRD IV for mortgage lending1 (which also includes mortgage administration2), or other firms passporting under another EU Directive for a non-mortgage activity and holding a top-up permission from the appropriate regulator3 for mortgage lending and/or mortgage administration. Also includes firms classed as "Treaty firms4" under Schedule 4 of the Act. But any other EEA firm type should complete in full all sections of the MLAR5 described above this table, as it would not be eligible for any reduction in reporting requirements.

Purpose of reporting requirements
The reasons why the appropriate regulator requires this data from home finance providers and administrators are as follows:

to assess the probability of the failure of firms and the impact of failure on
the ability of the appropriate regulator to meet its statutory objectives, including an assessment of compliance with the threshold conditions;
to assist with prudential supervision of firms; and

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/65363/06-03-2016. 2 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/65357/01-01-2013. 3 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/63473/06-03-2016. 4 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/66592/06-03-2016. 5 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/65328/01-01-2013.

to help assess the risks in the home finance market as a whole to inform,
for example, the appropriate regulator’s thematic work.
By this we mean that we will use some of our supervisory resources to examine issues (known as ‘themes’) that affect a number of firms rather than firms individually. The data collected will be considered alongside other information we receive, to identify trends and issues that inform our supervision of firms. The MLAR requires home finance providers and administrators to submit four types of data:
financial data to assist in the prudential supervision of home finance
providers and administrators. A quarterly financial return is required, including a balance sheet and profit and loss account;
quarterly reporting of quantitative and qualitative data by all home
finance providers and administrators to enable monitoring of compliance with the requirements of MCOB1;
quarterly provision of qualitative home finance information by all home
finance providers and administrators to enable the appropriate regulator to understand developments in the home finance markets as a whole, and to inform future policy developments and prudential supervision; and
quarterly annual reporting of information on fee tariff measures.
The reporting requirements set out in the MLAR will enable the appropriate regulator to realise these information needs. In particular:
Tables A to C, L, M: provide the framework for the appropriate regulator’s financial monitoring and prudential supervision of home finance providers and administrators; Tables D to F: provide the framework for the provision of qualitative home finance information by home finance providers
Table G, H: provides the framework for the appropriate regulator’s
monitoring of administering a home finance transaction activity.
Table J: provides information on fee tariff measures for home
finance providers and administrators.
Table K: provides the framework for the appropriate regulator’s
monitoring of SRB agreement providers and SRB administrators

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/65268/01-01-2013.

Regulated mortgage contracts and the wider mortgage market
Given this background to reporting requirements, the appropriate regulator’s approach to obtaining information on mortgage lending has been structured so that regulated mortgage contracts are seen within the wider context of the UK mortgage market as a whole. This approach can be illustrated as follows:
Each of these key terms is explained below:
(i) UK Mortgage market
This refers to all lending secured on land and buildings in the United Kingdom, whether to individuals, housing associations or corporates. However, given the importance of mortgages to individuals we have chosen to look at the market in terms of two components, namely 'residential lending to individuals' and 'other secured lending'. Loans and mortgages secured on land in the EEA other than the UK should be reported in ‘other loans’ in section A3 of the MLAR. (ii) Residential loans to individuals This is a discrete category of the mortgage market, and has characteristics (e.g. in terms of products, lending criteria and methods of credit assessments) that are often markedly different from those applying to other types of secured lending (e.g. to corporates). It is lending to individuals secured by mortgage on land and buildings where the lender has either a first or second (or subsequent) charge, where at least 40% of the land and buildings is used for residential purposes, and where the premises are for occupation by either the borrower (or dependant), or any other third party (e.g. it includes ‘buy to let’ lending to individuals). Only loans where there is a one-to-one correspondence between the loan and a specific security should be included within ‘residential loans to individuals’. Do not include here any residential loans to individuals that are part of a ‘business loans’ type package (involving multiple loans and multiple securities, where there is no one-to-one correspondence between a loan and a specific security), but report them under ‘other secured lending’. Regulated mortgage contracts that are secured on UK land are therefore a subset of this market category.

Examples of non-regulated mortgage contracts which fall under the wider category of residential loans to individuals include: buy-to-let loans and other types of loan where the property is not for use by the borrower (or qualifying dependents). Prior to 21 March 2016 non-regulated contracts also included second charge mortgage lending. and residential loans to individuals where the lender does not have a first charge. In the case where a lender takes a first and a second charge over the same residential property (for different purposes) we consider that generally the loan secured by the first charge will be a regulated mortgage contract, but that the loan secured by the second charge will invariably not and should be reported as non-regulated. Pending the UK implementation of the Mortgage Credit Directive, even though loans secured by a second or subsequent charge on residential property may potentially be regulated credit agreements, firms completing the MLAR in the period after 1 April 2014 should continue to include second charge mortgage business as business falling within non-regulated mortgage contracts. It is important, therefore, to separate this category from all other forms of secured lending. (iii) Other secured lending This covers all other forms of lending secured on land and buildings in the United Kingdom. Primarily it covers secured lending to corporate bodies (including to housing associations), but it also includes lending to individuals which, although being secured on land and buildings, is not deemed to be residential (e.g. the residential element is less than 40%). A corporate body for this purpose is any entity other than an individual. Loans and mortgages secured on land in the EEA other than the United Kingdom should be reported in ‘other loans’ in section A3 of the MLAR. It also includes any residential lending to an individual that forms part of a ‘business loan’ type package. These arrangements between a lender and a borrower are usually offered by a lender’s specialist business or corporate lending departments. They typically involve a number of loans secured against a range of securities including the borrower’s residential property, business premises and the business itself. Such packages involve no specific one-to-one correspondence between a single loan and a single security, and instead the lender assesses loan cover against the basket of securities in the package. Given the business nature of this type of lending, it would therefore be misleading to try and classify some or all of the loan elements in such cases to any part of ‘residential lending to individuals’, and hence all such lending should be reported under ‘other secured lending’. This is for MLAR reporting purposes only; the actual categorisation or treatment for MCOB purposes remains unchanged. (iv) Regulated mortgage contract This is defined in the FCA Handbook as follows:
(a) (in relation to a contract) a contract which; (i) (in accordance with article 61(3) of the Regulated Activities Order) a contract which, at the time it was is entered into, meets the following conditions:

(iA) a lender provides credit to an individual or to trustees (the ‘borrower’); and (iiB) the obligation of the borrower to repay is secured by a first legal mortgage on land (other than timeshare accommodation) in the United KingdomEEA, at least 40% of which is used, or is intended to be used, in the case of credit provided to an individual, as or in connection with a dwelling; by the borrower or (in the case of credit provided to a trustees who is not an individual), as or in connection with a dwelling by an individual who is a beneficiary of the trust, or by a related person.by an individual who is a beneficiary of the trust, or by a person who is in relation to the borrower or (in the case of credit provided to trustees) a beneficiary of the trust:
(A) that person’s spouse; or
(B) a person (whether or not of the opposite sex) whose relationship with that person has the characteristics of the relationship between husband and wife; or (ii) is not a home purchase plan, a limited payment second charge bridging loan, a second charge business loan, an investment property loan, an exempt consumer buy-to-let mortgage contract, an exempt equitable mortgage bridging loan, an exempt housing authority loan or a limited interest second charge credit union loan within the meaning of article 61A(1) or (2) of the Regulated Activities Order; and (iii) if the contract was entered into before 21 March 2016:
(A) at the time the contract was entered into, entering into the contract constituted the regulated activity of entering into a regulated mortgage contract1; or (B) the contract is a consumer credit back book mortgage contract within the meaning of article 2 of the MCD Order (C) that person’s parent, brother, sister, child, grandparent or grandchild. (b) (in relation to a specified investment) the investment, specified in
article 88 of the Regulated Activities Order, which is rights under a
regulated mortgage contract in (a).
[Note: articles 3(1)(a) and 4(2) of the MCD] Loans and mortgages secured on land in the EEA other than the UK, although regulated mortgages, should be reported in ‘other loans’ in section A3 of the MLAR. This means that in relation to a regulated mortgage contract, the following conditions must all be satisfied:

the borrower must be an individual or trustee;
the lender must take a first legal mortgage over UK property; and

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/65988/06-03-2016.

the property must be at least 40% occupied by the borrower or his
immediate family.
The definition of a regulated mortgage contract means that many kinds of loan are caught by regulation, not just loans for house purchase. For example it includes a significant amount of short-term first charge lending. This includes lending for home improvements (including some in-store credit), lending for debt consolidation, lending to finance a business, and some specific banking products such as secured overdrafts, secured credit cards, bridging loans and loans secured by all monies charges. 4a. Home reversion and home purchase plans Definitions (1) Home reversion plan This is defined in the FCA Handbook as follows:
(in accordance with article 63B(3) of the Regulated Activities Order) an arrangement comprised in one or more instruments or agreements which meets the following conditions at the time it is entered into:
(a) the arrangement is one under which a person (the reversion provider) buys all or part of a qualifying interest in land from an individual or trustees (the reversion occupier); (b) the reversion occupier (if he is an individual) or an individual who is a beneficiary of the trust (if the reversion occupier is a trustee), or a related person, is entitled under the arrangement to occupy at least 40% of the land in question as or in connection with a dwelling and intends to do so; and (c) the arrangement specifies that the entitlement to occupy will end on the occurrence of one or more of:
(i) a person in (b) becoming a resident of a care home; (ii) a person in (b) dying; or (iii) the end of a specified period of at least twenty years from the date the reversion occupier entered into the arrangement; in this definition "related person" means:
(A) that person's spouse or civil partner; (B) a person (whether or not of the opposite sex) whose relationship with that person has the characteristics of the relationship between husband and wife; or (C) that person's parent, brother, sister, child, grandparent or grandchild. Guidance to Home Reversion (HR) and Home Purchase Plan (HPP) firms on the completion of the MLAR

This section covers the interim reporting of HR and HPP products pending the outcome of the appropriate regulator's wholesale review of the MLAR under the appropriate regulator's agenda of Better Regulatio It is recognised that HR and HPP products are not loans as such, being effectively sale and lease products. However, in order to use the MLAR as a vehicle for capturing some data on these products, they are to be treated for MLAR purposes as if they were loan products. This means that:
(i) For a firm which is a provider of HR and/or HPP products:

HR and HPP products are to be included in the balance sheet
within A1.6 "Loans to Customers". This may differ from the reporting of such products in a firm's published accounts.
Within section A3, which contains a further breakdown of "Loans
to Customers", HR and HPP products are to be reported within the single category A3.5 "Other Loans".
As a consequence, the appropriate regulator will be able to capture
the key balances outstanding on these products (including any which may have been securitised) during the interim period. (ii) For a firm which is undertaking administration of HR and/or HPP products (and where that firm did not also act as provider of these products):
HR and HPP products being administered for third parties are to be
reported in section G
Within G1 and G2 they are to be reported within the "Other firms"
category. They should however be shown under "regulated loans" solely for the purposes of recording their administration in the MLAR.
In section G2.2, when entering the "name of firm" in column 2, add
"HR" and/or "HPP" in brackets after the name, as appropriate. However, for this interim period of reporting, the appropriate regulator does not propose to seek information about any arrears on HR and/or HPP products and hence such information should be excluded from section H. 4b. Sale and Rrent Bback (SRB) agreement business Definitions Regulated Sale and Rent Back agreement This is defined in the FCA Handbook as follows:
(in accordance with article 63J(3)(a) of the Regulated Activities Order) an arrangement comprised in one or more instruments or agreements, in relation to which the following conditions are met at the time it is entered into:
(a) the arrangement is one under which a person (an agreement provider) buys all or part of the qualifying interest in land in the United Kingdom from an individual or trustees (the "agreement seller"); and (b) the agreement seller (if he is an individual) or an individual who is the beneficiary of the trust (if the agreement seller is a trustee), or a related person, is entitled under the arrangement to occupy at least 40% of the land in question as or in connection with a dwelling, and intends to do so;

but excluding any arrangement that is a regulated home reversion plan. Guidance to sale and rent back (regulated SRB) firms on the completion of the MLAR This section explains how SRB firms should complete the MLAR. SRB providers and administrators should complete the following sections of the MLAR:

Section A (balance sheet);
Section B (profit and loss account);
Section C (capital);
Section J (fees tariff measures); and
Section K (sale and rent back business).
SRB firms should not complete sections D to H, L or M in respect of their SRB business. SRB providers should note the following in relation to their reporting of SRB agreements and SRB assets:
In section A
Do not enter any information on SRB agreements in A1.6 ‘Loans to
customers’ or A3.5 ‘Other loans’.
Report SRB assets in A1.11.
Report any liabilities incurred in acquiring SRB assets in A2.7.
In Section B
Where applicable, information on SRB agreements should be entered in B2.5
‘Other loans’.
As a consequence the appropriate regulator will be able to capture key information on these products.

Accounting conventions
Unless the contrary is stated in these guidance notes, the return should be compiled using generally accepted accounting practice. However, information in respect of lending (eg balances, advances, interest rates, arrears etc) to be reported in sections D, E, F, G, H and J of the return should not be fair-valued but should report the contractual position (ie as between lender and borrower). All amounts should be shown in one of the reporting currencies accepted by the relevant platform provided by the FCA, unless otherwise specified in the appropriate regulator’s Rulebook.
Accuracy
It is expected that entries on the return will be actual values, or in some cases close approximations established or drawn from the firm’s systems and prepared

on the basis of being the best information in the time available for their compilation. If such 'close approximations' are considered by the firm as likely to be materially different from the underlying actual values, the firm should advise its supervisory team of data items affected.
7. Time periods
Where stock figures are required (e.g. balance sheet, capital position etc) the information is required as at the firm’s accounting reference date and the three quarter ends following this date (see SUP 16.3.13R). Where flow figures are required, these are either for 3 months only (i.e. the latest quarter) as in for example lending figures in tables D and E, or cumulative in the 'year to date', (e.g. profit and loss in table B etc), covering the period from the firm’s accounting reference date to the end of the reporting quarter.
8. Loans made before 31 October 2004
This section does not apply to second charge mortgage contracts (i) Classifying the ‘back book’Loans made before 31 Oct 2004 fall into the following categories:
Many loans made before 31 October 2004 became regulated as regulated mortgage contracts on 21 March 2016 or, depending on the nature of the loan and the applicable transitional provisions, on a date no later than 21 March 2017; these loans should be treated as regulated mortgage contracts in the MLAR accordingly. Loans made before 31 October 2004 which continue not to be regulated as mortgage contracts fall in to the following categories:

residential loans to individuals (see Introduction, section 4(ii)) which,
for the purposes of the MLAR, should be classified as non-regulated (eg as at A3.3, and D1.2 etc)
other secured loans (see Introduction, section 4(iii)) and shown for
example at A3.4, D1.3 etc
other loans [see Guidance for A3.5]
The approach to classification for pre-31 Oct 2004 loans will, of necessity, need to be a pragmatic one. We do not for example envisage the need to look at individual paper loan files. Rather, we expect that athe firm will to apply its knowledge of its various loan books, products & and their characteristics, to come up with some realistic allocation rules. This will then enables the firm to apply some automatic process to its computerised loan records, and thereby classify individual loans into each of the relevant categories used in the MLAR. Such a process may not be perfect, and it may result in a few loans being wrongly allocated, but it will be sufficient for the purpose. In many cases, there will be further transactions in relation to this type of loan in the period immediately following 31 October 2004, and this event will provide an opportunity for the loan classification to be re-assessed, and if necessary, revised.

(ii) Specific treatment of residential loans to individuals Any loans made before 31 October 2004, that have not become regulated as regulated mortgage contracts, should be reported as non-regulated loans in the various parts of the MLAR. otherwise satisfy the specific requirements of a regulated mortgage contract, should be reported as nonregulated loans in the various parts of the MLAR (since only those loans advanced after this date are required to be treated as a regulated mortgage contract for the purposes of MLAR reporting). This reporting basis for loans made before 31 October 2004 should continue until such time, if ever, that a subsequent transaction on the loan causes it to be formally treated as a regulated contract. (iii) Further advances on loans made before 31 October 2004 which have not already become regulated as regulated mortgage contracts We cannot be prescriptive about whether, after the onset of mortgage regulation, a further advance (or any other variation) to a pre-31 October 2004 mortgage will have the effect of creating a new regulated mortgage contract. Whether a variation amounts to creating a new contract will depend on each lender's individual mortgage documentation. This documentation will differ, possibly significantly, between firms. Each lender will need to review its existing documentation and take a view on the scope that this provides for making changes. In practice this means that:

if the lender can make a further advance without creating a new contract,
(i.e. makes a variation to the existing mortgage contract) then the further advance should be added to the original loan and the combined loan treated as a single loan for MLAR reporting. This combined loan should be reported as ‘non-regulated’;
if making a further advance creates a new contract, (and this further
advance is a regulated mortgage contract) then the correct reporting approach will be determined as follows:
(a) where the original loan was made before 31 October 2004, has not in the meantime become a regulated mortgage contract (for example, because it is not a regulated credit agreement) 1, but would otherwise satisfy the specific requirements of a regulated mortgage contract, and the further advance is documented in a new loan agreement separate from the original loan (and is not a variation to the existing mortgage contract), the original loan and further advance may be treated as one for MLAR reporting, being shown as "Regulated" under "Residential loans to individuals". (b) where the original loan did not satisfy the defined conditions of a regulated mortgage contract at the time it was entered into, and has not in the meantime become a regulated mortgage contract, and the

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/65975/06-03-2016. [ regulated CONSUMER credit agreement]

old loan and further advance is documented in a new loan agreement separate from the original loan (and is not a variation to the existing mortgage contract), the old loan and further advance will be treated as two separate loans for most aspects of MLAR reporting, the former being ‘unregulated’ while the latter will be reported as ‘regulated’.will be treated as two separate loans for most aspects of MLAR reporting, the former being ‘unregulated’ while the latter will be reported as ‘regulated’. However, for the LTV & Income Multiple analysis, while the firm should only show the amount of the further advance in the relevant "cell", the "cell" should be determined by using the total amount of the loan (old loan + further advance) when deciding which LTV band and which Income Multiple band are applicable; and. (c) where the lender decides to combine the original loan and the further advance to create a single new contract that replaces the existing is a regulated mortgage contract and is regulated mortgage contract, this should be reported as ‘regulated’.
9. Specific items
9(i) Positions to be reported gross
In general, liabilities and assets should be shown gross, and not netted off (unless there is a legal right of set-off). Thus an account which moves from credit to debit will move from one side of the balance sheet to the other. A notable exception to this however concerns the reporting of loan assets, which should follow MIPRU1 4.2.14R - MIPRU 4.2.16G. Such assets should be shown in the balance sheet net of linked funding and also on this basis in other tables where balances are reported on the same basis. Only sections A3, D2, G and H require the reporting of such loan assets on a ‘gross’ basis. The treatment of loan assets that are being operated as part of a current account offset mortgage product (or similar products where deposit funding is offset against loan balances in arriving at a net interest cost on the account) will depend on the conditions pertaining to the mortgage product. The balance outstanding on such loans will need to be reported on the basis of the contractually defined balance according to the terms of the mortgage product. This might be the amount of loan excluding any offsetting funds, or it might be the net amount. 9(ii) Foreign currencies Firms should report in the currency of their annual audited accounts, where this is Sterling, Euro, US dollars, Canadian Dollars, Swedish Kroner, Swiss Francs or Yen. Where annual audited accounts are reported in a currency outside those specified above, please translate these values into an equivalent within the list using an appropriate rate of exchange at the reporting date, or where appropriate, at the rates of exchange fixed under the terms of any relevant currency hedging transaction, and that value used in the return. Please report in thousands where stated on the return. Firms should apply the same accounting treatment as for their published accounts.

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/65318/06-03-2016.

SECTION A: BALANCE SHEET
Balance sheet analysis
A1, A2 The balance sheet is intended to reflect the practices used in compiling published or other accounts, although its format in the MLAR (with 'total assets' and 'total liabilities') will not necessarily be the same as that used by firms in their regular accounts. However, the differences should only be presentational. ‘Loans to customers’ is expected to be the customer balance after any write-offs have been taken. A1.6 Loans to customers may be a non-standard accounting sub-head for some firms whose business is not primarily mortgage related. But since this is an explicit MLAR data requirement, it should be split out from the sub-head under which it is routinely shown in the firm’s other accounts. Include HR and HPP products here. A1.11 Other current assets should include all assets measured at fair value not included in any other asset category on the return. Include any SRB assets here. A2.1 Shareholders' funds should include any unrealised gains or losses resulting from the fair valuation of available-for-sale financial assets, and any fair value gains or losses arising on cash flow hedges of financial instruments measured at cost or amortised cost. A2.7 Other liabilities should include all liabilities measured at fair value not included in any other liability category on the return. Include any liabilities incurred in acquiring SRB assets here. A3 Analysis of loans to customers This section recognises that some lenders may have securitised loans on their balance sheet, and hence provides for unsecuritised/securitised loans to be shown separately. Unsecuritised balances are analysed in terms of three elements: gross loan balances (before deduction of any provisions); provisions balances in respect of those balances; and the net balances after deduction of such provisions. Securitised balances are analysed in a similar way, except that 'gross' also means before the deduction of any linked non-recourse funding, the amount of which is also to be shown separately. A3.1-4 See Introduction (paragraphs 4 (i) to (iv)) for details of the coverage of these terms. A3.5 Other loans refers to any lending secured on land and buildings outside of the UK, any loan for which security is provided other than by land and buildings, together with all unsecured loans (e.g. consumer credit, personal loans, or such loans to corporates). Loans and mortgages secured on land in the EEA other than the UK should be reported here.

A3.6 It is expected that net balances on unsecuritised loans plus net balances on securitised loans will equal the entry shown at A1.6 in the main balance sheet analysis of assets.

SECTION B: PROFIT & LOSS ACCOUNT
B0 Financial year to date
In terms of reporting period, the analysis should be compiled on a 'year to date' basis, covering successively 3, 6, 9 or 12 months from the firm’s accounting reference date. B1 Profit & Loss Account The P&L section is intended to reflect the practices used in compiling accounts prepared under the Companies Acts, although its format in the MLAR (with explicit focus on financial items such as interest, fees & commission etc) will not necessarily be the same as that used by firms in their regular accounts. The reason for this approach is that most lenders to which this section is applicable are mortgage specialists, and as such it is considered desirable to put their P&L format onto a similar basis as that used for banks and building societies. The analysis therefore requires the firm’s profit & loss account to be restructured in a way that makes a number of items explicit in the interests of achieving consistency with other reporting firms. B1.1 Focuses on gross profit from non-financial activities. B1.2-1.7 Covers a range of income elements which are more closely related to financial activities, including in particular those associated with mortgage lending. In particular B1.7 Other income should include unrealised gains in respect of assets and liabilities which have been measured on a fair value basis. B1.9-1.13 Covers a range of expenditure elements, including those related to nonfinancial and also to financial (including mortgage related) activities. In particular B1.13 Other expenses should include unrealised losses in respect of assets and liabilities which have been measured on a fair value basis. B1.15 Operating Profit is total income less total expenses. B1.16 Provisions covers write-offs and provisions charges on bad and doubtful debts, (including for example on mortgage loans); any suspended interest (i.e. any interest included in Interest Receivable which, through loan default, impairment or otherwise, is deemed unlikely to be received); and any other provisions for contingent liabilities.

B2 Provisions analysis
This supplementary analysis draws together the key movements in provisions balances from the firm’s accounting reference date up to the reporting quarter end. The two ‘flow items’, namely write-offs and provisions charges, are those relating to the period from the firm’s accounting reference date up to the reporting date. The total of provisions charges in line B2.6 [column 3] will not necessarily be the same as the provisions charge in the Profit & Loss analysis at B1.16 (since this latter item may include further provisions against other asset items not included in B2.6, or provisions arising from other sources).

SECTION C: CAPITAL
INTRODUCTION
The threshold conditions state that the resources of a firm must be adequate in the opinion of the appropriate regulator in relation to the regulated activities that the firm seeks to carry on or carries on. In addition, a firm is required to maintain 'adequate financial resources'. A home finance lender/administrator should have adequate capital and funding in order to be able to meet these requirements. In addition, the FCA and the PRA are required to identify the main risks to their statutory objectives. In assessing firm-specific risks we are required to assess the risks arising from the financial failure of a firm (due to business risks from the external environment, or control risks arising from the firm itself) which might affect both the market and individual customers1. The specific FCA objectives that are potentially impacted are those relating to market confidence and consumer protection. Details provided in this Section on Capital are drawn from the appropriate provisions of MIPRU 4 (Capital Resources) C1-2 CAPITAL RESOURCES C1 and C2 set out the individual components of eligible capital and the separate deductions that should be made to arrive at capital resources. Components of eligible capital are:
(1) Share capital
Share capital must be fully paid (i.e. the firm is under no obligation to repay this capital unless and until the firm is wound up) and may include ordinary share capital or preference share capital (excluding preference shares redeemable by shareholders within two years). See paragraph (7) Subordinated loans below for details of the limits that may apply to the inclusion of redeemable preference shares in capital resources. (2) Partnership or sole trader capital Partnership capital is capital made up of the partners’capital account. The capital account is an account into which capital contributed by the partners is paid and from which, under the terms of the partnership agreement, an amount representing capital may be withdrawn by a partner only if he ceases to be a partner and an equal amount is transferred to another such account by his former partners or any

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/64100/01-01-2013.

person replacing him as their partner, or the partnership is otherwise dissolved or wound up. Sole trader capital is the net balance on the firm’s capital account and current account. (3) Reserves Reserves are accumulated profits retained by the firm (after deduction of tax, dividends and proprietors’ or partners’ drawings) and other reserves created by appropriations of share premiums and similar realised appropriations. Reserves also include gifts of capital, for example, from a parent company. For partnerships, reserves include partners’ current accounts according to the most recent financial statement. Reserves must be audited unless the firm is eligible to include unaudited reserves in its capital resources calculation under MIPRU 4.4.2R. The reserves figure is subject to the following adjustments, where appropriate:
(a) any unrealised gains must be deducted or, where applicable, any unrealised losses added back in on cash flow hedges of financial instruments measured at cost or amortised cost; (b) any unrealised gains must be deducted or, where applicable, any unrealised losses added back in on debt instruments held in the available-for-sale financial assets category. Any unrealised gains or losses on equities held in the available-for-sale financial assets category should be reported at C1.5; (c) in respect of a defined benefit occupational pension scheme, any defined benefit asset must be derecognised; A firm may substitute for a defined benefit liability the firm's deficit reduction amount provided that that election is applied consistently in respect of any one financial year. (4) Interim net profits and partners’ interim current accounts A firm is not required to take into account interim net profits. However, if it does, the profits have to be verified by the firm’s external auditors, net of tax, anticipated dividends or proprietors’ drawings and other appropriations unless the firm is eligible to include unverified interim net profits in its capital resources calculation under MIPRU 4.4.2R. In terms of the verification for inclusion, for the first, second and third financial quarters firms may include interim profits in their MLAR, on the understanding that the firm will obtain the required verification from its external auditors within two months of the financial quarter end. (The appropriate regulator may ask for a copy of the verification statement.) For the fourth quarter the appropriate regulator will rely on the forthcoming audited accounts as providing verification and accordingly the full year’s profits should be included in the make-up of Eligible Capital under Interim Profits in the return.

(5) Revaluation reserve
Firms should report reserves relating to the revaluation of fixed assets. (6) General /collective provisions Firms should report general/collective provisions that are held against potential losses that have not yet been identified, but which experience indicates are present in the firm’s portfolio of assets. Such provisions must be freely available to meet these unidentified losses wherever they arise. General/collective provisions must be verified by external auditors and disclosed in the firm’s annual report and accounts unless the firm is eligible to include unaudited general and collective provisions in its capital resources calculation under MIPRU 4.4.2R. (7) Subordinated loans Subordinated debt (i.e. the amount of principal outstanding before amortisation) must not form part of the capital resources of a firm unless it meets the following conditions:
(1) it has an original maturity of at least five years or is subject to five years’ notice of repayment; (2) the claims of the subordinated creditors must rank behind those of all unsubordinated creditors; (3) the only events of default must be non-payment of any interest or principal under the debt agreement or the winding up of the firm; (4) the remedies available to the subordinated creditor in the event of non-payment or other default in respect of the subordinated debt must be limited to petitioning for the winding up of the firm or proving the debt and claiming in the liquidation of the firm; (5) the subordinated debt must not become due and payable before its stated final maturity date except on an event of default complying with (3); (6) the agreement and debt are governed by the law of England and Wales, or of Scotland, or of Northern Ireland; (7) to the fullest extent permitted under the rules of the relevant jurisdiction, creditors must waive their right to set off amounts they owe the firm against subordinated amounts owed to them by the firm; (8) the terms of the subordinated debt must be set out in a written agreement or instrument that contains terms that provide for the conditions set out in (1) to (7); and (9) the debt must be unsecured and fully paid up.

For a mortgage lender or mortgage administrator undertaking business connected to regulated mortgage contracts (unless its Part 4A permission prevents it from undertaking new business), MIPRU 4.4.8R limits the amount of subordinated loans and redeemable preference shares that can be included in eligible capital. In Table C of the MLAR the firm will deduct from capital resources under item C2.3a any amount by which the subordinated loans and redeemable preference shares exceed the limit in MIPRU 4.4.8R. Treatment of eligible capital items (listed above) in section C1:
C1.1 Reserves: include items

reserves
revaluation reserves
C1.2 Interim profits: include items
interim net profits
partners’ interim current accounts
C1.3 Issued capital: include items
share capital
partnership or sole trader capital
C1.3a Subordinated loans
C1.4 General/collective provisions
C1.5 Other eligible capital: includes
any other item of eligible capital not required to be included in items
C1.1 to C1.4, including any unrealised gains or losses on equities held in the available-for-sale financial assets portfolio. C1.6 Total Eligible Capital This is the sum of the components listed in C1.1 to C1.5. C2 Deductions from capital C2.1 Investments in own shares represents any investment in the shares of the company, quantified as fixed assets in the balance sheet. C2.2 Intangible assets are the full balance sheet value of goodwill, capitalised development costs, brand names, trademarks and similar rights and licences. C2.3 Interim net losses refers to the cumulative amount covering the period from the firm’s accounting reference date to the end of the current quarter. All the current year’s losses should be reported. Unpublished losses from the previous accounting period should also be shown here.

C2.3a Subordinated loan and redeemable preference share restriction This is the amount of any excess as computed under the restriction explained in paragraph (7) of the C1-2 CAPITAL RESOURCES
section above.
C2.4 Other deductions from capital: include

Excess of drawings over profits for partnerships or sole traders:
firms should report the difference between the personal drawings of a partnership or sole trader and the profit in the period, where the drawings exceed the profit for the period. C2.5 Total Deductions This is the sum of the components listed in C2.1 to C2.4. C3 CAPITAL RESOURCES CALCULATION C3.1 CAPITAL RESOURCES This is total eligible capital less total deductions (C1.6 – C2.5). C3.2 Capital requirement This is the amount calculated in section in C4.6(e). C3.3 SURPLUS / (DEFICIT) OF RESOURCES This is the capital resources less the capital requirement (C3.1 – C3.2). C4 CAPITAL REQUIREMENTS C4 Capital requirement for a lender, or an administrator with administered assets on its balance sheet C4.1 The capital requirement for lenders or administrators that have the regulated mortgage contracts that they administer on their balance sheet is asset-based, and the information required is detailed in C4.2 to C4.6. C4.2 Total assets: this is the total value of assets as shown at line A1.12 in
section A of the MLAR.
C4.2a Assets subject to the credit risk requirement This is the amount of assets subject to the credit risk requirement computation as shown at line 6A in section L of the MLAR. This is relevant for a mortgage lender; or mortgage administrator with its administered assets on balance sheet, that undertakes business connected to regulated mortgage contracts that has one or more exposures which satisfy the conditions set out in MIPRU 4.2A.4R. C4.3 Undrawn commitments

Undrawn commitments means the total of those amounts which a borrower has the right to draw down from the firm but which have not yet been drawn down (see MIPRU 4.2.12R and MIPRU 4.2.13G). However, undrawn commitments should not be included in the calculation of capital requirements if they have an original maturity of up to one year or if they can be unconditionally cancelled at any time by the lender. Similarly, existing mortgage offers should not be included in the calculations of capital requirements if the offer has an original maturity of up to one year or can be unconditionally cancelled at any time by the lender. C4.4 Intangible assets: this is the amount shown at C2.2. C4.5 Total adjusted assets: this is the sum of C4.2 and C4.3, less C4.2a and C4.4 C4.6 CAPITAL REQUIREMENT This section sets out how to calculate the capital requirement for a lender, or an administrator with administered assets on its balance sheet (See MIPRU 4.2.12R, MIPRU 4.2.18R and MIPRU 4.2.23R):
a) is the minimum requirement of £100,000; b) is 1 % of the amount shown as total adjusted assets at C4.5, ie the assets that are not subject to the credit risk requirement calculation; c) is the credit risk requirement as shown at line 9E in section L of the MLAR; d) is the total of b) and c); and e) is the capital requirement which is the higher of the fixed amount at a) and the sum shown at d). C5 Capital requirements for an administrator not having administered assets on its balance sheet C5.1 This section sets out the income-based capital requirements applicable to administrators that do not have the assets that they administer on their balance sheet. The information requirements are detailed in C5.2 – 5.5. Firms should report the following amounts from both their most recent annual financial statement and their estimated accounts for the current reporting year. C5.2 Total income Firms should report the amount of total income in their most recent (or other) financial statements, and an estimate of income for the current reporting year.

Total income should include both revenue and gains arising in the course of the ordinary activities of a firm. Revenue consists of commissions, fees, net interest income, dividends, royalties and rent. Only gains that are recorded in the profit and loss account should be included in income. What is relevant for the calculation of income is the amount of actual income generated rather than the gross cash streams of any one transaction (see MIPRU 4.3.7R). C5.3 Relevant adjustments The following exceptional items must be deducted from the firm’s total income:
(1) profit on the sale or termination of an operation; (2) profit arising from a fundamental reorganisation or restructuring having a material effect on the nature and focus of the firm’s operations; and (3) profits on the disposal of fixed assets, including investments held in long-term portfolio. C5.4 Total relevant income Is the sum of C5.2 minus C5.3. C5.5 CAPITAL REQUIREMENT This sets out how to calculate the capital requirement for a administrator not having administered assets on its balance sheet (see MIPRU 4.2.19R):
a) is the minimum requirement of £100,000; b) is 10 % of the amount shown as total relevant income at C5.4 above; and c) is the capital requirement which is the higher of the minimum amount at a) and the calculation shown at b).

SECTION D1: LENDING – BUSINESS FLOWS AND RATES
D1-D4 For details of the terms 'Residential lending to individuals' (and regulated/unregulated) and 'other secured loans', see Introduction, paragraphs 4 (i) – (iv). D1 Loans: Advances/Repayments – Row & Column Analysis For the two categories of loan assets, details are requested under various transaction columns that explain the transition from the previous quarter's balances to the current quarter's balances. D1 Loans: Advances/Repayments – Transactions (columns) Advances made in quarter should include:
(a) instalments released in the quarter for instalment advances; (b) re-advances, i.e. where previous charge cancelled; (c) further advances; (d) in the case of loans that have a facility to draw down extra amounts over and above the sum originally advanced, the total of any further amounts drawn down in the quarter; (e) the deduction from advances made of advance cheques cancelled; but should exclude:
(f) the amount of any loan books acquired in the quarter (which should be reported in 'other debits/credits etc'); (g) retentions imposed, which should be included as they are released; (h) sundry debits, i.e. any items not approved and not included in commitments, e.g. insurance debits, fines, insurance guarantees, valuation fees, arrangement fees etc. (unless formally treated as
part of loan, that is where such amounts are repaid over the
period of the loan);
(i) any movements on overdrafts.
Repayment of principal should include:
(a) repayment of principal including capital repayments, full or partial redemptions and the principal element of the normal monthly payment; (b) mortgage receipts temporarily posted to investment accounts; (c) transfers from investment accounts to mortgage accounts;

but should exclude:
d) the amount of any loan book sold during the quarter (to be reported in 'other debits/credits etc'); (e) sundry credits to accounts, such as insurance premiums, fines, fees, etc; (f) advance cheques cancelled; (g) investment receipts temporarily posted to mortgage accounts; (h) any movement in overdrafts. In determining the amount shown under repayment of principal, it is recognised that firms may need to estimate the amount of interest repaid where amounts repaid include both interest and principal, and/or where the amount of interest repayable is not the same as the amount charged (e.g. annual review or deferred interest schemes, or where a loan is not being fully serviced). Write offs in quarter This is the amount written off mortgage balances in the quarter (and off provisions charged to the income and expenditure account) and is to be on a basis consistent with amounts shown in the firm's published accounts as 'written off' within the analysis of changes in loss provision usually appearing as Notes to the Accounts. The amount written off may arise for example from:

sale of a property in possession where there is a shortfall; or
a decision to write down the mortgage debt on a loan still on the
books. This may arise where the firm has taken the view that it is certain that a loss will arise and that it is prudent to write down the mortgage debt rather than carry the full debt and an offsetting provision. Examples might include certain fraud cases, or where arrangements have been reached with the borrower to reduce the mortgage debt repayable.
The amount should be net of any write-backs in the quarter. If there are more
write-backs than write-offs the net figure should be shown as negative.The amount should be net of any write-backs in the quarter. If there are more write-backs than write-offs the net figure should be shown as negative. Other debits/(credits) and transfers (net) include:
(a) interest charged to the loan account in the period; (b) interest repaid during the period; (c) amounts charged to loan accounts and amounts received from borrowers in respect of such items as insurance premiums, valuation fees, and fines etc.;

(d) mortgage balances acquired following takeover / merger; (e) loan books acquired from other lenders in the quarter; (f) loan books sold to other lenders in the quarter; (g) loan books securitised during the quarter; (h) the transfer of any securitised assets back onto the balance sheet (e.g. following the closure of a securitised pool of loans); (i) transfers (net) should include any reclassified loans (e.g. where there has been a change in the use of the land on which the loan is secured to/from residential; or change in status of loan from/to regulated/non-regulated etc); (j) all movements on overdrafts (that is, net change in overdraft balances), other than writeoffs. NB Balances on loan books acquired/sold/securitised should be as at the date of the relevant event and not be subject to any revaluation factors. Overdraft analysis (final 3 columns of D1):
The term “overdraft” here and in other columns of D1, is used to cover two types of revolving credit facilities: overdrafts and credit cards. The balance at end of quarter in column 6 is further analysed into loan balances excluding overdrafts and, separately, balances on overdrafts. The final column in D1 represents the sum total, across all overdraft accounts included in the penultimate column, of the individual credit limits on each such overdraft. D2 Loans: Book movements The 'transactions in the quarter' columns are analyses of amounts already included within the 'other debits/(credits) and transfers (net)' column of section D1. (i) 'loans acquired' represents balances on any relevant loan books acquired during the quarter from other lenders; (ii) 'loans sold' represents balances on any relevant loan book (i.e. parcel of loans) sold during the quarter to another lender; (iii) 'loans securitised' represents balances on any loans that the firm has 'securitised' in the quarter. It includes balances on loans subject to securitisation transactions which should follow MIPRU 4.2.14R – MIPRU 4.2.16G. Securitised loans brought back onto the balance sheet in the quarter should also be included and the amount here should be net of them. If the amount of securitised loans brought back onto the balance sheet is greater than the securitised balance then the net figure should be reported as a negative; and

(iv) 'other' represents the net amount of other transaction amounts included in 'other debits/(credits) and transfers (net)' in D1. NB: As a result, D2 [item (i) – item (ii) – item (iii) + item (iv)] should equal D1 [item 'other debits/(credits) and transfers (net)]. The final column 'balance at end quarter on loan assets subject to non-recourse funding' represents all such loan assets (and not just the amount treated as transactions in the quarter), and requires the 'gross amount' of such loan assets to be reported against relevant line item categories. Non-recourse funding can either be established by contract or in-substance. The 'gross amount' is the amount of any such loan that would be shown in a firm's published or other balance sheet as X in the example below:
gross loan asset = X less non-recourse funding = Y net loan asset = X-Y In the analysis here at D2, it is therefore the gross loan asset at the end of the reporting quarter that should be reported in the final column. Once securitised, it is recognised that end quarter gross balances will not necessarily remain constant (due either to borrower repayments, the possibility of any further advances, or other arrangement for 'topping up' a pool of securitised loans etc). D3 Loans: Interest rates Basis Interest rates in this table are nominal annual rates charged to the customer on loan accounts excluding overdrafts (as defined in D1). They should ignore the effect of any interest rate swaps or other hedging contracts that might exist, and also ignore the effect of any offsetting deposit account (as for example in the case of an offset mortgage). This provides an analysis of weighted average interest rates for the loan assets reported under ’Loans excluding overdrafts’ in column 7 of D1 above. 'Interest rates at end of quarter' (columns 4, 5, and 6 of
section D3) means rates applying at least throughout the last day of the
quarter, so firms should not use rates which only come into operation at the beginning of the next quarter. Points to note on specific columns are:
(1) Balances at end quarter
Accrued interest should be included (even though it is excluded when computing the weighted average rate). The first 'of which' analysis is designed to obtain information on balances subject to fixed rates of interest and balances subject to variable rates of interest. (The two amounts should add to the balance

in column 1). For these purposes:
'fixed' means the rate of interest is fixed for a stated period. It should also include any products with a 'capped rate' (i.e. subject to a guaranteed maximum rate) and any products that are 'collared loans' (i.e. subject to a minimum and a maximum rate). Annual review or stabilised payment loans should be excluded (since the purpose is merely to smooth cash flow on variable rate loans); 'variable' includes all other interest rate bases (i.e. other than those defined above as 'fixed') applying to particular products, including those at, or at a discount or premium to, one of the firm's administered lending rates; those linked to Libor (or other market rate); those linked to an index (e.g. FTSE) etc. However if any such loan products are subject to a 'capped rate', then treat as 'fixed'. The second 'of which' analysis is designed to obtain information on loan balances according to whether the nominal annual interest rate charged to the customer at the quarter-end is higher than the prevailing Bank of England Base (or repo) Rate (BBR). For these purposes the BBR is that applying on the last day of the reporting quarter. The analysis is subdivided into four categories:
(i) loan balances where the rate charged is less than 2% above BBR. Include here also all loan balances where the rate charged is less than BBR (as a result the sum of these four columns will equal the figure in the TOTAL column); (ii) loan balances where the rate charged is 2% or up to 3% above BBR; (iii) loan balances where the rate charged is 3% or up to 4% above BBR; (iv) loan balances where the rate charged is 4% or more above BBR. (2) Weighted average nominal annual rates (a) Interest rates reported in Table D3 provide a broad indication of market rates. They should ignore the effect of any interest rate swap or hedging. For each line item the weighted average rate should be derived as follows:
(i) identify the various nominal/quoted interest rates that apply to elements of this line item; then (ii) for each separate nominal/quoted rate, multiply that rate by the amount of end quarter balances (excluding accrued interest) for which that rate applies; and (iii) add up the results of (ii) for all the different rates for this line item; and

(iv) divide the total calculated in (iii) by the corresponding end quarter balance in column 1, 2 or 3 less accrued interest (against the line item concerned). NB: in the 'of which' analysis that requires separate reporting of weighted 'fixed' and 'variable' rates, a cross check for each row is that the weighted average nominal rate on all balances is equal to the weighted average of the reported fixed and variable rates in the subsequent two columns. D3.1 –3.8 Other Points The interest rate to be used is the rate charged to the loan account, which in certain circumstances will differ from the interest rate 'payable' by a borrower. These circumstances include deferred interest loans, interest roll-up loans, annual review schemes or where the loan is not performing. Advances in quarter refers to the same amount as covered under 'advances in quarter' in the Loans: Advances/Repayments analysis in
Section D1 above.
D4 Loans: Commitments (columns)
Commitments made since end of previous quarter should include:
(a) the aggregate of formally agreed advances (whether or not the mortgage offer has been accepted by the prospective borrower), including amounts recommended for retention, all instalment elements, and further advances; but should exclude:
(b) commitments from previous quarters that have been cancelled in the current quarter; (c) retentions imposed and subsequently not released; (d) instalment commitments that have not been taken up; (e) advance cancellations that are not re-issued; (f) sundry debits, e.g. insurance debits, fines, insurance guarantees, valuation fees, arrangement fees etc (unless formally treated as
part of the loan, that is where such amounts are repaid over the
period of the loan).
Cancellations in quarter
Includes (b), (c), (d) and (e) above.

Advances made in quarter
This refers to the same amount as covered under ‘advances in quarter’ in section D1 above. Other debits/(credits) and transfers (net) This is unlikely to be needed on a routine basis. It is intended to cover less frequent events such as loan commitments acquired on merger with another firm or acquisition of a loan book; or transferred on sale of a package of loans; or where 'commitments outstanding' need adjusting for reasons not attributable to other columns.

SECTION E: RESIDENTIAL LOANS TO INDIVIDUALS - New business profile
E1-6 Gross advances in quarter
Covers actual advances made in the quarter. For these purposes separate advances (e.g. stage payments) made in the period on the same mortgage should count as a single advance for the 'number' column in sections E3, E4, E5 and E6. NB: 'gross advances' should be compiled on the same basis as in
section D1 above and therefore relevant totals for each section in
E1 to E6 should also agree with the amount of gross advances reported in D1. E3-6 Balances outstanding Covers balances at end of the quarter. Relevant sub-totals should agree with corresponding balances shown under ‘Loans excluding overdrafts’ in column 7 of D1. E1/2 By Income Multiple and LTV (Loan to Valuation ratio) The amount to be included in the table is the gross advance, but its allocation to a specific cell is determined according to income multiple and LTV which are both defined using the size of the loan (as defined below). E1/2 By Income Multiple and LTV Income multiple based on single or joint incomes For this analysis, 'income' should be taken as gross annual income before tax or any other deductions. The loan should first of all be categorised to 'single' or 'joint' income basis, and the income multiple calculated as described below:
(i) Single income basis. This means only one person's income was taken into account when making the lending assessment/decision. The income multiple here is the total loan amount divided by the borrower's total income (total of the borrower's main income and any other reckonable income e.g. overtime etc, to the extent that the firm takes such additional income into account in whole or in
part).
(ii) Joint income basis. This means that two or more persons' incomes were used in the lending assessment/decision. The income multiple here is the total loan amount divided by the aggregate income of the two or more borrowers.

(iii) Other. This category is to be used when the loan assessment is based, only partly or not at all, on one or more persons' incomes. Thus include here:
Under Single Income section (E1.6/E1.13)

Buy to let loans where the loan assessment is based on the
rental yield of the property (but not buy to let loans based solely on one or more persons' incomes which should be shown against the relevant income multiple category);
Lifetime mortgages since in most if not all instances, the
concept of a supporting income is not applicable;
Other products (no current examples)
Under Joint Income Section (E2.6/E2.13)
Business loans, where typically the loan assessment will be
based on mixed sources of business/personal income or perhaps just on the capacity of a person's business to support the loan;
Other products that have similar characteristics, that is
where the loan assessment is based on either mixed income sources or non-personal incomes. (iv) Not evidenced. This 'of which' analysis applies to loans made on the basis of one or more persons' incomes, and therefore should exclude any loans reported in "Other" (defined in (iii) above). It covers loans where: the lender has no independent documentary evidence to verify income (e.g. as provided by an employer's reference, a bank statement, a salary slip, a P60, or audited/certified accounts For the purpose of income multiples, the multiple is of loan to income where loan is as defined below. Loan to valuation ratio LTV Should be based on the following:
(i) loan is defined for:
(a) new borrowers - as the amount of actual advance or, in the case of loans where the amount advanced in the period is less than the total amount of the loan to which the firm has agreed to lend (for example loans with additional drawing facilities or loans involving instalments/stage payments/retentions), is the amount of

committed advance (including any committed drawing facilities); (b) existing borrowers - as the total amount of debt outstanding including the further advance plus any committed drawing facilities at the time of the further advance; and will include MIG ("mortgage indemnity guarantee"), building and other insurance premiums and other sundry items if these are included in the amount advanced; (ii) valuation is to be taken as the most recent valuation of the property which is subject to the mortgage (the existence of additional collateral on any other property should be ignored when calculating LTV). For these purposes, "recent valuation" can either be based on an actual valuation, or an estimated valuation using indexed valuation methodology applied to an original actual valuation. In the case of staged construction or self-build schemes, valuation means 'expected final value of the property' at the time the firm is committed to making the loan (i.e. takes the lending decision). E3 Credit History This seeks to categorise lending in terms of a borrower’s previous credit history, as measured at the point when the new advance is made. For these purposes, it is only necessary to establish a borrower’s credit history at a single point in time, i.e. at the time of making the loan. In practice this will usually be done at the ‘offer’ stage of making a loan. It is not intended that credit history should be reassessed after the loan has been made. However, if a further advance is made, then it will be necessary to re-assess. In particular the aim is to separately identify under the heading 'Impaired credit history', those loans where it appears that the borrower has some form of adverse credit history:
(i) at the point when the new advance is made and the loan is reported under 'Gross advances'; (ii) subsequently for reporting under 'Balances outstanding', the amount of the loan at the quarter end to such a borrower (who at the point when the present loan was advanced, was deemed to have had an adverse credit history). However, if there is subsequently a further advance on the loan (and which will be reported under ‘Gross advances’ in E3), this is an occasion to re-assess the borrower’s credit history. At that stage, the total amount of the loan (including further advance) should be classified under ‘Balances outstanding’ on the basis of the credit history as determined at the time of making the further advance. This

means that the further advance and total loan amount will be reported on a consistent basis. E3.1 Impaired credit history If any of the following conditions are met at the time of making the loan, the borrower should be reported as having an impaired credit history:
(i) arrears on a previous (or current) mortgage or other secured loan within the last two years, where the cumulative amount overdue at any point reached three or more monthly payments; (ii) arrears on a previous (or current) unsecured loan within the last two years, where the cumulative amount overdue at any point reached three or more monthly payments; (iii) one or more county court judgements (CCJs), with a total value greater than £500, within the last three years; (iv) being subject to an Individual voluntary arrangement (IVA) at any time within the last three years; (v) being subject to a bankruptcy order at any time within the last three years; but firms should not include technical arrears as part of the above definition. Technical arrears means circumstances where the borrower has been the victim of a banking error giving rise to late payment. NB In (i) to (v), firms should ignore whether the borrower has subsequently paid off arrears, or has satisfied/discharged a CCJ or IVA or bankruptcy. In the case of loans involving two or more borrowers, the impaired credit test is whether any one of the borrowers individually meets any of the five listed impaired credit conditions. E4 Payment type This section analyses loans in terms of how the borrower is contractually expected to service the loan, and is split into four categories:

repayment;
interest only;
combined; and
other.

E4.1 Repayment (capital & interest)
This is the traditional payment option available to borrowers. Such loans involve regular periodic payments covering interest for the period and some repayment of capital. E4.2 Interest only This is the type of loan which requires the borrower to make regular payments of interest only (i.e. without any obligation to make periodic payments of capital). It includes 'endowment' type loans, others having an independent ultimate repayment vehicle (e.g. PEP, ISA or pension mortgages), as well as other interest only loans where there is either no specific ultimate repayment vehicle in place or where the lender does not formally require one to be in place. E4.3 Combined This section is for loans where both of the above payment types are in place (i.e. part of the loan is ‘repayment’, and part is ‘interest only’). E4.4 Other This category will contain loans where no regular periodic payment obligation is in place, for example secured overdraft facilities or secured credit cards, and lifetime mortgages. E5 By drawing facility These are loans which include an option to draw down further amounts (i.e. where, at the outset of the loan, extra drawing rights exist over and above the original amount advanced, but not those arising only in relation to previous overpayments). The drawing facility category is also meant to indicate a facility that is only exercisable by the borrower (e.g. via a cheque book, on line transaction or on demand). It would therefore not apply to situations where a loan is merely subject to retentions or stage payments, since the borrower does not have a draw-down option that he can exercise. E5.1 Extra drawing facility These are loans which in general are structured as follows:
Example structure when flexible loan contract agreed Amount of loan advanced £65,000 Amount of extra drawing £15,000 facility agreed to (but not advanced at outset of loan) Total loan facility up to £80,000

E5.1 a) Loans including unused facility This means the total loan facility i.e. the sum of the amount of loan advanced and the amount of extra drawing facility agreed (but not advanced at the outset of the loan):
(i) gross advances in quarter should detail those loans that include an extra drawing facility: show the number and amount of such loans; (ii) loans outstanding means the end quarter balances (on original advance plus any subsequent draw downs) plus the residual amount of any unused drawing facility that remains available to the borrower: show the number and amount of such loans. E5.1 b) Unused facility This is the amount of the extra drawing facility that has not been drawn down by the borrower:
(i) gross advances in quarter should detail the unused facility element of such loans: show the amount; (ii) loans outstanding means the end quarter balances of any unused extra drawing facility that remains available to the borrower: show the amount. E5.1 c) Net loans This can be calculated by subtracting the entry in row b) from the entry in row a). E5.2 Loans with no extra drawing facility Firms should report all other loans here. E5.3 TOTAL This figure should be calculated as follows:
(i) for 'Number' by adding E5.1(a) and E5.2, and (ii) for 'Amount' by adding E5.1(c) and E5.2. E6 By Purpose This analysis is to identify the principal purpose of the loan, which should be available from the application form. A loan should therefore

only be classified to one category of E6.1 – E6.7. A stage advance should be classified for the same purpose as the main advance. E6.1/2 House purchase Loans where the borrower is purchasing a house (or flat etc). Firms should include stage payments on such transactions here and not in 'further advances'. A distinction is drawn between loans for house purchase where the purpose is for owner occupation, or for buying with a view to letting ('buy to let'). Loans for owner occupation are required to be sub divided into those to first time buyers (FTBs, that is where the tenure of the main borrower immediately before this advance was not owner-occupier) and those to other buyers. E6.2 Buy to let (BTL) Such loans typically involve the borrower purchasing a residential property with the intention of letting it out on a rental basis. The majority of BTL loans will be those used by the borrower to acquire a property with the intention of letting it on a commercial basis to unrelated third parties. That is to persons, who in relation to the borrower, are not ‘related persons (where ‘related persons’ are those set out in subsections (A), (B) and (C) of section 4 (iv) of the Introduction). These BTL loans are not regulated mortgage contracts and hence should be shown in columns 5 to 8 of E6.2 under ‘Non regulated loans’. However, where a BTL loan is used by the borrower to acquire a residential property that will be occupied by a related person, such a loan will normally be a regulated mortgage contract (providing it satisfies the other requirements of a regulated mortgage contract) and should therefore be shown in columns 1 to 4 of E6.2 under ‘Regulated loans’. An example of such a loan is where a parent buys a house or flat for use by a student son or daughter, with a plan to take in other students on a rental basis. Further advances and remortgages on any BTL loans should be included within E6.2 E6.3 Further advance A further loan (either as a normal further advance, or as a second charge loan where the firm has the first charge) to an existing borrower of the firm, secured on the same property. The underlying purpose of the further advance is not relevant and could include e.g. purchasing freehold interest in a currently owned leasehold

property; buying a second property on the security of the first; as a consumer loan fully secured on residential property; or as a ‘drawdown’ on a flexible mortgage. However, further advances on existing buy to let loans, and on lifetime mortgage loans should instead be reported against E6.2 and E6.6 respectively. E6.4/5 Re-mortgage Loans where the borrower is not moving house but is refinancing an existing loan, either one already with the firm or one from another lender. The whole amount of the new advance should be classified as 'remortgage' even if it is larger than the existing loan. Re-mortgages from another lender are well understood, and need no further comment. But a ‘re-mortgage’ by one of a firm’s existing borrowers (i.e. ‘own borrower’ in E6.4) will not always be transacted in exactly the same way by different lenders. The following comments are designed to provide some illustrative examples, and indicate how the actual transaction between lender and borrower should be reported:

Example 1: borrower changes from variable rate to fixed rate, with
loan amount unchanged, at say £100k. Some lenders' systems formally treat this as a redemption and a new loan advance which is reportable under "advances" in D1 (in which case report as "remortgage" under this analysis of advances in E6), but other lenders treat it as an interest variation and not as a new advance (so not included in advances in D1 or E)
Example 2: borrower changes from variable rate to fixed rate and
takes out additional loan at the same time, say extra £25k on top of existing £100k. Some lenders will treat as a redemption of £100k and a new advance of £125k (in which case the £125k is a remortgage), but others may treat as two loans (with first loan regarded as just subject to an interest rate variation, and the extra loan as a "further advance")
It is recognised that practices vary among lenders when it comes to
further advances or re-mortgages. What is important is that the actual transaction between the lender and the borrower is reflected in the MLAR.
Thus if a firm genuinely treats the advance of new money as a
further advance (perhaps setting up a second sub account), then that should be reported as such (e.g. at E6.3)
However if the old loan is formally replaced with a new loan (at
the same or increased size) and this is reported in "advances" in D1, then the new loan should similarly be reported in E, and in E6.4 shown as "re-mortgage". NB However, re-mortgages on existing buy to let loans, and on lifetime mortgage loans, should instead be reported against E6.2 and E6.6 respectively. E6.6 Lifetime mortgages (i) Regulated loans: Lifetime mortgages (columns 1 to 4) This is a specific type of regulated mortgage contract, which is defined in the FCA Handbook as follows:
A regulated mortgage contract under which:
(1) An MCD exempt lifetime mortgage; or (2) (other than (1)), a regulated mortgage contract or an article 3(1)(b) credit agreement under which:
(a) entry into the mortgage is restricted to older customers above a specified age; and (b) the lender may or may not specify a mortgage term, but will not seek full repayment of the loan (including interest, if any, outstanding) until the occurrence of one or more of the specified life events; and (c) while the customer continues to occupy the mortgaged land as his main residence:
(i) no instalment repayments of the capital and no payment of interest on the capital (other than interest charged when all or part of the capital is repaid voluntarily by the customer), are due or capable of becoming due; or (ii) although interest payments may become due, no full or partial repayment of the capital is due or capable of becoming due; or (iii) although interest payments and partial repayment of the capital may become due, no full repayment of the capital is due or capable of becoming due. (a) entry into the mortgage is restricted to borrowers of a specified age; and (b) the mortgage lender does not generally specify a period at the end of which the amount borrowed (plus interest, if any, outstanding) must be repaid, and while the customer continues to occupy the mortgaged land as his main residence:
(i) no instalment repayments of the capital and no payment of interest on the capital (other than interest charged when all or part of the capital is repaid voluntarily by the customer), are due or capable of becoming due; or

(ii) although interest payments may become due, no full or partial repayment of the capital is due or capable of becoming due; or (iii) although interest payments and partial repayment of the capital may become due, no full repayment of the capital is due or capable of becoming due; and (c) the loan made to the customer is repayable in one or more of the following circumstances:
(i) the death of the customer; or
(ii) the customer enters into long term care; or (iii) the customer moves into sheltered accommodation or residential care; or (iv) the customer acquires another dwelling for use as his main residence; or (v) the customer chooses to repay all or part of the loan; or (vi) the mortgage lender exercises its legal right to take possession of the mortgaged land under the terms of the contract. (ii) Non-regulated loans: ‘Lifetime mortgage’ (columns 5 to 8) Loans to be included under these columns include:

loans having broadly similar characteristics to those set out in (i)(a),
(b) and (c) above, but which were advanced before 31 October 2004. Such loans will usually have been known as ‘equity release loans’.
loans made after 31 October 2004, which whilst not satisfying the full
criteria needed to be classed as a regulated mortgage contract (e.g. since a second but not a first charge is taken), nonetheless match the characteristics set out in (i)(a), (b) and (c) above. (iii) Further advances and re-mortgages on any of the loans described in (i) and (ii) above, should be included within E6.6 E6.7 Other Would include for example where a borrower is not moving house but takes a loan on the security of his previously unmortgaged property.

SECTION F: LENDING - ARREARS ANALYSIS
Introduction
The guidance notes in this section serve two purposes: they provide guidance for (i) items F1 to F5 shown in MLAR table F. For these sections, the analysis of lending refers to on-balance sheet loan assets only, but excluding overdrafts (ie as included under ‘Loans excluding overdrafts’ in column 7 of section D1 of
table D)
The responsibility for completing table F lies with the authorised lender, irrespective of whether the lender administers the loans itself or out-sources the administration elsewhere. The information should therefore appear as part of the lender’s MLAR. (ii) items H1 to H5 shown in MLAR table H. For these sections, which cover reporting of arrears by firms with a mortgage administrator's activity, the analysis should include arrears in respect of the types of residential loans to individuals set out in the guidance notes for table G, but only where the firm is acting as 'principal administrator'. For guidance on items H1 to H5 see corresponding guidance against items F1 to F5. Similarly references in the guidance notes to any items F1 to F5, should also be read as referring to items H1 to H5 when completing table H. F1 to F4 Arrears categorisation by type of loan For these sections, the analysis of lending is divided into two main types:
(i) residential loans to individuals (split between regulated and non regulated business); (ii) all other secured loans. The analysis is based on expressing the amount of arrears on each loan as a percentage of the customer’s balance outstanding on the loan, allocating cases to relevant arrears bands, providing details of cases moving up into more serious arrears bands in the quarter, and giving information on loan performance during the quarter. (In cases where there is more than one loan secured on a single property, these should be amalgamated, where possible, in reporting details of arrears cases.)

Definitions of terms used above, and those related to them, are given below in sections having side headings numbered 1, 2, 3, 4, 5 and 6. F1.6/F2.6 & In possession: cases should be included here where the property is F3.6/F4.6 taken in possession (through any method e.g. voluntary surrender, court order etc). For development loans in particular, cases should also be included where the appointment of a receiver and/or a manager has been made, or where the security is being enforced in other ways (which may or may not also involve the existence of arrears e.g. building finance case with interest roll up, no arrears, but a current valuation is less than the outstanding debt).

Balance outstanding (columns 3 and 6)
1.1 This is the amount of total debt at the reporting date, and should
comprise the total amount outstanding (after deducting any write-offs but without deduction for any provisions) in respect of:
(i) the principal of the advance (including any further advances made); (ii) interest accrued on the advance (but only up to the reporting date), including any interest suspended; (iii) any other sum which the borrower is obliged to pay the firm and which is due from the borrower, e.g. fees, fines, administration charges, default interest and insurance premiums; and is intended to be consistent with the basis used for presentation of gross balances outstanding shown in the balance sheet section of the return (i.e. at A3 Column 1 for on-balance sheet or unsecuritised balances, and at A3 column 4 for securitised balances), with the addition for tables F and H of any interest suspended not included in the balance sheet.
Amount of arrears (columns 2 and 4)
2.1 Arrears will arise through the borrower failing to service any element of
his debt obligation to the firm, including capital, interest, or fees, fines, administrative charges, default interest or insurance premiums.
2.2 At the reporting date, the amount of arrears is the difference between:
(i) the accumulated total amounts of (monthly or other periodic) payments due to be received from the borrower; and (ii) the accumulated total amount of payments actually made by the borrower.

2.3 Only amounts which are contractually due at the reporting date should
be included in 2.2(i) above. That is:
(i) include accrued interest only up to the reporting date but not beyond; (ii) and, only include a proportion of any annual insurance premium if the firm permits such amounts to be paid in periodic instalments. However if the terms of the loan or the lender’s practice are such as to permit insurance premiums to be added to the loan principal then do not treat such amounts as contractually due; (iii) similarly, where 'any other sum' has been added to the loan (see
1.1 (iii) above), only include such proportions as are contractually
due (e.g. if it is the practice in particular circumstances to add the sum/charge to the loan and require repayment over the residual term of the loan); (iv) in assessing 'payments due' when a borrower has a flexible loan, it is important to apply the contractual terms of the loan: for example, payment holidays which satisfy the terms of the loan should not be treated as giving rise to an arrears position; (v) do not however include 'Deeds Store' loans in the arrears figures (that is, loans where the debt is de minimis e.g. £100, but the borrower still has insurance premiums to pay and perhaps some instalments are overdue).
2.4 In the case of annual review schemes the 'payment due to be received'
under 2.2(i) is that calculated under the scheme. This may well differ from the amount charged to the account but should not of itself give rise to any arrears, providing the borrower is making the level of payments advised by the firm. The same principles apply to deferred interest products - if the borrower is making the payments that are required under the loan arrangements then he is not in arrears, even though the debt outstanding is increasing.
2.5 Where a firm makes a temporary 'concession' to a borrower (i.e., an
agreement with the borrower whereby monthly payments are either suspended or less than they would be on a fully commercial basis) for a period, the amounts included in 2.2(i) are those contractually due (and at commercial rates of interest). Hence the borrower will continue to be in arrears and the level of arrears will in fact continue to increase until such time as he is able fully to service the debt outstanding.
2.6 Where the terms of the loan do not require payment of interest (or capital)
until a stated date or until redemption or until certain conditions are triggered, as for example in the case of certain building finance loans, then the loan is not in arrears until such time as contractual repayments

the loan is not in arrears, it falls to be reported under F1.6, F2.6, F3.6 or F4.6. (See notes on F1.6/F2.6/F3.6/F4.6 at beginning of Section F.)
2.7 The reporting treatment of cases where arrears have been capitalised is
dealt with in section 3 below.
2.8 Where a 'capitalisation' case that has at one time been correctly removed
as fully performing (see section 3) but at some later time defaults, then this should be treated as a new default and the amount of arrears taken as that arising from this new default. That is, the previously capitalised arrears should not be reinstated as current arrears.
3. Capitalisation of arrears and reporting criteria
3.1 By 'capitalisation' we mean a formal arrangement agreed with the
borrower to add all or part of a borrower's arrears to the amount of outstanding principal (i.e. advance of principal including further advances less capital repayments received during the period of the loan) and then treating that amount of overall debt as the enlarged principal. This enlarged principal is then used as the basis for calculating future monthly payments over the remaining term of the loan. Where less than the full amount of arrears is capitalised (or indeed where none of the arrears is capitalised) then, providing there are arrangements made for the borrower to repay the non-capitalised arrears over a shorter period ranging for example from 3 to 18 months, this type of arrangement should also be regarded as an equivalent of 'capitalisation'.
3.2 The decision to 'capitalise' (or treat as if capitalised) is a business
decision between the firm and the borrower. However for the purposes of consistency in reporting arrears cases in table F (and reporting capitalisations in section F5) the following reporting criteria should be used where a firm has capitalised the loan (or treated as if capitalised) and reset the monthly payment:
(i) such an arrears case should continue to be included in sections F1 – F4 as an arrears case until the loan has been 'fully performing' (see (ii) below) for a period of six consecutive months (any temporary increase in arrears during this qualifying period has the effect of requiring six consecutive months of fully performing after such an event). Until that time it should be included in
table F, and be allocated to the arrears band applicable at each
reporting date as if 'capitalisation' had not taken place; (ii) for these purposes a loan is considered to be 'fully performing' only where the borrower has been meeting all obligations on the loan with regard to repayments of principal, interest (at a normal mortgage rate on the full balance outstanding, including as appropriate any relevant past arrears), any payment towards clearing past arrears as agreed with the firm and any default

payments due levied in respect of previous missed repayments. That is, amounts may be either added to the principal of the loan or otherwise repaid over a shorter period than the residual term of the mortgage, as agreed between firm and borrower. But then this revised payment schedule must be fully maintained for a six month period before the arrears can qualify to be treated as capitalised for reporting purposes and hence removed from the arrears cases in table F; (iii) arrears cases qualifying as 'fully performing' under (ii) should then be omitted from sections F1-F4, and should then be reported in section F5 for the same reporting period during which the removal occurs.
4. Cases entering higher (i.e. more serious) arrears band in quarter
(columns 1 to 3)
This refers to those cases now included in a particular arrears banding which may have been classified in a less severe (i.e. lower numerical) band at the end of the previous quarter, but which have deteriorated sufficiently during the quarter to move to a more severe arrears band. This would mean, for example, that cases that were previously excluded from the arrears table being less than 1.5% in arrears would now be entered in the '1.5 < 2.5%' arrears band (i.e. 1.5% or less than 2.5%) in F1.1, and F1.6 (and F2.6/F3.6/F4.6) will show details of those cases taken into possession during the quarter which were previously classified as in arrears under any of F1.1-1.5 (or F 2.1-2.5/3.1-3.5/4.1-4.5, as the case may be). Cases which have improved during the quarter and which could now be classified in a less severe arrears band should not be included in these 3 columns.
5. Number (of cases) (Columns 1 and 4)
5.1 In cases where there is more than one loan secured on a single property,
these should be amalgamated, where possible, in reporting details of arrears cases.
5.2 In cases involving, for example, arrears on loans to property developers
(which would come under F4), the loan should count as a single case in the number column irrespective of the number of properties on the development itself.
6. Performance of current arrears cases (column 7)
6.1 This analyses all those arrears cases included in columns 4 to 6 and gives
a measure of performance covering all of the loans in a particular arrears band at the end of the quarter. The measure, which compares 'actual' with 'expected' payments, is required to be calculated for a single time period: the 3 months covered by the firm's latest financial quarter. For this time period, the performance measure should be calculated as a percentage as follows:

49 total of 'payments received' from borrowers x 100 total of 'payments due' from borrowers where:
(i) 'payments due' means amounts due under normal commercial terms (and not the lesser amounts which may have been agreed as part of any temporary arrangement) fully to service the loans: that is the balances outstanding including those elements referred to in 1.1 above such as insurance, fees and fines etc. (If for some reason this is not readily available then a suitable approximation can be derived for each relevant quarter by applying one quarter of the annual interest rate to the appropriate balance outstanding, and adding in other payments due for example insurance, fees and fines etc); and (ii) 'payments received' should be limited to regular repayment of interest, capital and other sundry charges to the loan account, and should exclude abnormal repayments (e.g. sale proceeds of property in possession, and large lump sum repayment of part or all of the outstanding balance). The reasoning behind this is that excess payments on one or more arrears cases would otherwise have the effect of compensating for underpayment on other arrears cases and, as a result, give an overstated performance measure. Therefore, in compiling aggregate payment received figures (as part of the payment performance ratio) the contribution from an individual loan in arrears should be limited to no more than the 'payment due' amount.
6.2 The amount to be entered on the return is a percentage to 2 decimal
places. Given the limitation described in 6.1 (ii), it cannot exceed 100%.
6.3 In calculating the performance measure on possession cases (F1.6, F2.6,
F3.6 and F4.6), the following points are relevant:
(i) 'payments received': in many cases these may be nil, but not always since the property in possession may be let out and a rental income received. In each case the payment received should be included for the purposes of calculating the performance measure; (ii) 'payments due': in recognition of the fact that amounts of interest will still be charged to the borrower’s account, then the 'payments due' should be calculated as three months’ interest at normal commercial rates of interest; (iii) however, in F1.6, F2.6, F3.6 and F4.6, it is likely that the performance measure will in most instances be zero;

(iv) the relevance of the above however, is that 'payments due' on possession cases need to be computed in order to feed into the overall performance measure at F1.6, F2.6, F3.6 and F4.6.
6.4 The overall measure of performance at F1.7 (and similarly at F2.7, F3.7
and F4.7) includes possessions, and is the ratio of:
(i) 'payments received' on all cases in F1.1 to F1.6 (ii) 'payments due' on all cases in F1.1 to F1.6 The same approach should be used for F2.7, F3.7 and F4.7. F5 Arrears management Number of Sales/Number of (arrears) cases In cases where there is more than one loan secured on a single property, these should be amalgamated where possible in reporting details of possession cases sold during the period in F5 (column 1), and details of arrears cases in F5 (columns 3 & 4). Balance outstanding In F5 (columns 2 and 5) this is as defined in section F/1 paragraph 1.1 (including in the case of properties sold the costs of sale where these have been debited to the borrower's account), and should be the balance at the end of the quarter. Possession sales during quarter Firms should include in F5 (columns 1 and 2) all properties sold in the quarter irrespective of whether losses have occurred. Capitalisation of arrears cases in quarter Details should be given in respect of those cases which, having previously been in the reported figures in table F on arrears, have now been capitalised (or treated as if capitalised), have satisfied certain performance criteria for six months, and have been removed during the latest quarter from the arrears figures which now appear in sections F1 – F4. Sees paragraph 3 of section F of the guidance notes. Cases involving temporary concession or arrangement In respect of the number of cases in arrears at the end of the quarter (i.e. reported in F1 to F4.7), details should be given of those cases for which the lender has taken steps to assist the borrower in some way.

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Specifically, firms should state in how many cases a temporary concession has been made (see paragraph 2.5 in Section F), and in how many cases a formal arrangement to capitalise has been made (see paragraph 3.1 in section F, which also includes within the term 'arrangement' the example of a borrower making increased monthly payments to reduce some or all existing arrears). The balancing number should be shown in the next column 'No concession/arrangement'.

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SECTION G: MORTGAGE ADMINISTRATION – BUSINESS PROFILE
Introduction
Article 61 of the Regulated Activities Order establishes administering
a regulated mortgage contract as a regulated activity. This applies equally to those firms that are lenders, and those whose principal business is to undertake mortgage administration on behalf of third parties. For firms that are authorised as mortgage administrators only, the information sought in this section will enable the appropriate regulator to establish the extent and nature of the firm’s mortgage administration business. The appropriate regulator will be able to assess the potential risks posed by the firm’s business activities and tailor its regulatory response accordingly. A mortgage administrator is a firm with permission (or which ought to have permission) for administering a regulated mortgage contract and where, as defined in article 61(3)(b) of the Regulated Activities Order, administering a regulated mortgage contract consists of either or both of:

notifying the borrower of changes in interest rates or payments due
under the contract, or of other matters of which the contract requires him to be notified; and
taking any necessary steps for the purposes of collecting or
recovering payments due under the contract from the borrower; but a person is not to be treated as administering a regulated mortgage contract merely because he/she has, or exercises, a right to take action for the purposes of enforcing the contract (or to require that such action is or is not taken). does not consist merely of having or exercising a right to take action to enforce the regulated mortgage contract, or to require that action is or is not taken. You should note that this section applies to firms with just a mortgage administrator’s activity and those with both a mortgage lender’s and mortgage administrator’s activity. You should also note, however, that if you have both a mortgage lender’s activity and a mortgage administrator’s activity to administer your own book and do not have any off-balance sheet loans to administer, then you should not complete this section of the MLAR. ‘Principal’ and ‘Other’ Administrators Because of the extent of specialisation and separation of activities in the provision of mortgage lending and administration services, we need to identify whether a firm that is authorised as a mortgage administrator is acting for MLAR purposes as a ‘principal administrator’ or as an ‘other administrator':
Principal administrator: this is where your firm is authorised to
undertake a mortgage administrator’s activity, and is exercising that activity on behalf of either a lender or other firm that is not itself authorised to undertake a mortgage administrator’s activity;
Other administrator: this is where your firm (although authorised
to undertake a mortgage administrator’s activity) is undertaking loan administration for either a lender or other firm which itself is also authorised to undertake a mortgage administrator’s activity. In this situation, your firm is not regarded as the ‘principal administrator’, and you are merely acting on behalf of an authorised mortgage administrator. G1 Mortgage contracts administered at end quarter Where your firm is acting as Principal administrator (columns1-3) Collects data on mortgage contracts administered as at the end of the quarter, but only where you are formally acting as principal in exercising a mortgage administrator's activity. It therefore excludes the reporting of:
any loan administration where you, being a firm without a
mortgage administrator's activity, are merely providing an outsourced service for a third party which does have a mortgage administrator's activity and which is exercising it in respect of those loans; and
any loan administration where you, a firm having a mortgage
administrator's activity, are acting as agent and providing an outsourced service for a third party which itself has a mortgage administrator's activity and which is exercising it in respect of those loans. If you also have a mortgage lender's activity, then you should treat your own on and off-balance sheet loans as follows:
(i) your firm's on-balance sheet loans should be excluded from G1.1 a) and G1.2 a). These items will therefore only include loans administered for third party lenders who do not themselves have a mortgage administrator's activity; ii) your firm's off-balance sheet loans should be included in G1.1 c) and G1.2 c). These will be the loans you have shown in
section A3 "Securitised balances" under "gross balances".
(These items G1.1 c) and G1.2 c) will also include loans you administer for other special purpose vehicles1 where you are formally exercising your mortgage administrator's activity).

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/66368/06-03-2016.

Where your firm is acting as Other administrator (columns 4-6) Record under these columns all of the mortgage contracts administered at the end of the quarter where you are not acting as a principal administrator. G1.1 Number of loans You should detail the number of regulated mortgage contracts administered as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for special purpose vehicles (‘SPVs’). You should also detail the number of non regulated loans administered as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for SPVs. The total (all loans) is the sum of regulated mortgage contracts and non-regulated loans. G1.2 Balance outstanding on loans You should detail the balances outstanding on all regulated mortgage contracts that you administer as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for SPVs. You should detail the balances outstanding on all non regulated loans that you administer as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for SPVs. The total (all loans) is the sum of regulated mortgage contracts and non-regulated loans. G2 Lenders for whom mortgage administration was being carried out at quarter end Collects data only on the top five lenders for each category by value ( i.e. the largest five firms by value, based on balances outstanding on regulated loans) for whom mortgage administration was being carried out at the quarter end. (Details on other lenders are not required to be shown, over and above the top five listed in each category.)

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The analysis required in G2 covers all mortgage administration activity undertaken by your firm, irrespective of whether your firm is acting as a ‘principal’ or ‘other’ administrator. The final column of the analysis, however, asks you to indicate your status for each firm listed, namely whether acting as ‘Principal’ or as ‘Other’ administrator. G2.1 Firms with a mortgage lender’s activity Please detail the top five firms (by value) for whom mortgage administration was being carried out at the quarter end. You should include the firm's reference number in addition to the name of the firm. You should indicate the value of regulated mortgage contracts and nonregulated loans for each of the top five firms for whom you administer such contracts. The total (all loans) for each firm listed is the sum of regulated mortgage contracts and non-regulated loans. G2.2 Other firms Please detail the top five other firms (by value) for whom mortgage administration was being carried out at the quarter end (but who themselves do not have a mortgage lender’s activity). You should indicate the value of regulated mortgage contracts and nonregulated loans for each of the top five other firms for whom you administer. The total (all loans) for each firm listed is the sum of regulated mortgage contracts and non-regulated loans. G2.3 SPVs Please detail the top five SPVs (by value) for whom mortgage administration was being carried out at the quarter end. If your firm has off-balance sheet loans (which it has reported in G1.1 c) and G1.2 c)) then please show your firm as one of these five SPVs as follows:

group together all SPVs for which your firm is the originator and
show the aggregated amounts on a single line (irrespective of whether the total of regulated loans for all such SPVs would rank within the top five);
under "firm reference" column, put your firm's reference number;
under "Name of firm" column, put your firm's name followed by
"own SPVs" in brackets, for example XYZ firm name (own SPVs).

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You should indicate the value of regulated mortgage contracts and nonregulated loans for each of the top five SPVs for whom you administer. The total (all loans) for each SPV listed is the sum of regulated mortgage contracts and non-regulated loans.

SECTION H: MORTGAGE ADMINISTRATION – Arrears Analysis
Type of loans to be reported
This arrears analysis should cover only those types of loan listed below, in respect of which your firm is formally acting as principal in exercising a mortgage administrator's activity. Thus, irrespective of whether your firm has a mortgage administrator's activity, if you are merely acting as an administrator for a third party that itself has, and is exercising, a mortgage administrator's activity, then you should not include any such loans in this analysis. The types of loans to be included in the analysis are:
(i) loans administered for firms which do not themselves have a mortgage lender's activity. These are the loans reported at G1.2 b) in table G. (ii) loans administered for third party SPVs. (iii) where your firm has a mortgage lender's activity, loans that represent your firm's off-balance sheet loans and which you have reported in section A3 of table A as "gross balances" under "Securitised balances". NB loans in (ii) and (iii) are all those shown in G1.2c of table G. The information presented in table H should represent the total of all such loan types listed above, in a single version of the table. H1-H5 Guidance on arrears items The guidance for these items is provided in section F of these guidance notes, where items H1 to H5 correspond to items F1 to F5. The arrears analysis is of loan balances excluding overdrafts, as is the case in section F.

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SECTION J: FEE TARIFF MEASURES
J1 Introduction
The purpose of this section is to enable the firm to provide data on the current fee tariff measures that apply to each of the regulated activities of home finance providing activity and administering a home finance transaction. This section also distinguishes between the fee tariff measures that apply to the appropriate regulator FCA and FOS Ltd (Financial Ombudsman Service Limited). Since the relevant fee tariff measures may change from time to time, these guidance notes merely define where the current definitions of fee tariff measures are to be found. Accordingly the following is a referenceplease refer to the relevant part of the appropriate regulator's FCA’s website Handbook where such details can be found:

Refer to FEES 4 Annex 1AR and Annex 2AR of the Rulebook
FCA Handbook for the appropriate regulatorFCA fee tariff* Refer to FEES 5 Annex 1R, Annex 2R and Annex 3R of the FCA’s Handbook for the FOS Ltd fee tariff To the extent that the FOS fee tariff measure requires other relevant activities that the firm carries out to be taken into account, these should be included in J1.3. In relation to section J of the MLAR, firms must report the information required by this section solely in their year end MLAR. Firms with an accounting reference date of between 31 December and 31 March (inclusive) must report the information required by this section as at 31 December of the calendar year immediately before the relevant fee period. All other firms must report the information required by this
section as at 31 December of the previous calendar year. For example,
for 2006/07 fees, for firms with an accounting reference date of between 31 December 2005 and 31 March 2006 (inclusive) the information required by section J is that calculated as at 31 December

For all other firms the information required by section J is that
calculated as at 31 December 2004.

SECTION K: SALE AND RENT BACK BUSINESS (SRB)
Introduction
This section must be completed as follows:

SRB agreement providers must complete K1 to K4
SRB administrators must complete K5
Firms that are both SRB agreement providers and SRB
administrators must complete K1 to K5.
K SRB: Residential sales by individuals It is expected that firms will have the following to report:
regulated SRB agreements: in respect of transactions entered into
since SRB became a regulated activity, and
non-regulated SRB agreements: in respect of transactions of a
similar nature entered into before SRB became a regulated activity which are still being administered; and also any new contract that, while not meeting the precise conditions for a regulated contract, nonetheless has similar characteristics (for example cases where the purchaser is not regulated or where the firm has purchased a property under value and rents an alternative property to the seller). This approach means that all new and existing sale and rent back agreements – whether regulated or not, and whether transacted before or after SRB became a regulated activity – must be included in the information reported by the firm in section K. K1 Overall business summary This section looks at the firm’s SRB position at the start of the reporting quarter, at the various movements in the quarter, and at the end quarter position. Details required are:
K1.1 SRB agreements at start of quarter: those agreements that existed at the end of the previous quarter. This line should normally agree with figures reported as at the previous quarter end. K1.2 New sales in quarter: new SRB agreements transacted in the quarter, where the firm has obtained title to the property and monies have been paid to the SRB seller. ‘Amount’ is the sale value (paid to seller) and should be reported gross, that is, before the deduction of any fees and charges. K1.3 Disposals in quarter: SRB agreements where the firm has sold the actual property. ‘Amount’ is the SRB value of the contract as used for the same contract reported in K1.1. Transfers or sales of SRB agreements should be reported under ‘Business transfers-sales’ below.

K1.4 Business transfer-acquisitions: where the firm acquires one or more existing SRB agreements from another party or parties. K1.5 Business transfer- sales: where the firm sells one or more existing SRB agreements to another party or parties. Include also transfers of such agreements to any party. K1.6 Other: include any other amounts which affect the balances reported in K1.1 and K1.7, that is which reflect any change in the book value of any SRB agreements during the quarter. This is to capture any ‘amounts’ that will affect the overall position but is not covered by K1.2-K1.5. A value is required to be recorded in the ‘Amount’ column only. K1.7 SRB agreements at end of quarter: the number and book value of SRB contracts in existence at the end of the quarter. K1.8 SRB agreements arranged for unauthorised persons: The number of SRB agreements arranged where an unauthorised person has obtained title to the property and monies have been paid to the SRB seller. The ‘Amount’ is the sale value (paid to seller) and should be reported gross, that is, before the deduction of any fees and charges. NB: it is expected that figures in K1.7 will reconcile with those in other rows as follows:

For ‘Numbers’: K1.7 = K1.1 +K1.2 – K1.3 + K1.4 – K1.5
For ‘Amounts’: K1.7 = K1.1 + K1.2 – K1.3 + K1.4 – K1.5

K1.6
K2 New business in the quarter
This section looks at various aspects of new business that has been transacted in the quarter: each is described below. For each aspect:

The ‘sale value’ means the gross amount paid to the seller before
any fees and charges have been deducted.
The ‘All sales’ line should agree with figures reported in K1.2.
K2.1 to 2.3 Sales: analysed by discount on open market value (OMV) Here SRB transactions are classified into different bands, according to the amount of discount expressed as a percentage of the open market value of the property that is subject to the SRB contract. Discount is the open market value minus the sales value. Values are required to be recorded in both the ‘Number’ and ‘Amount’ columns. So for example, for those SRB agreements where the

61 discount is 30% to under 40%, enter the total number of such sales and the total sales values of those agreements in the relevant boxes on the K2.2 line. K2.4 Average of all sales The average discount is recorded as an amount. This value should therefore be recorded in the ‘Amount’ column only. For example, if 4 properties with an open market value of £100,000 were bought at a 25% discount and 4 properties with an open market value of £120,000 at a 35% discount, the average amount of discount is £33,500. K2.5 to 2.6 Sales: analysed by provider fees charged Here, SRB transactions are classified into two different bands, according to the amount of provider fees charged to the SRB agreement. Enter the total number of such sales in the ‘Number’ column and the total sales values of those agreements in the ‘Amount’ column. K2.7 Average fees charged The average amount of provider fees are recorded here. This value should be recorded in the ‘Amount’ column only. For example, if 8 new agreements were entered into during the quarter with provider fees totalling £4000, enter £500 (£4000 divided by 8) in the ‘Amount’ column. K2.8 to 2.9 Sales: analysed by annual rent as percentage of sale value K2.8 Here the total number of new SRB agreements (entered in the ‘Number’ column) and the amount of average monthly rent being charged at the outset of the agreements (entered in the ‘Amount’ column) is recorded. K2.9 The average rental yield percentage is calculated as the total annual rent for all new SRB agreements in the quarter divided by the total sales values, entered in the ‘Amount’ column. K3 SRB agreements terminated or transferred in the quarter This analyses SRB agreements terminated by either the provider or seller, and also those SRB agreements transferred to other parties. K3.1 to K3.6 Agreements terminated:

By firm
This is where the seller has breached the terms and conditions of the SRB agreement and the provider has exercised the right to terminate the contract. Here, terminations are analysed according to the duration of the contract in particular time bands. For each time band, enter the total number of such terminations At the end of the quarter, some or possibly all of these agreements in K3.1 to K3.6 will also be included in end-quarter figures at K1.7. Those not included may already have been disposed of (reported at K1.3), or sold or transferred to third parties (reported at K1.5). By seller This is where the seller has exercised the right to buy back the property under the SRB agreement, or where the seller has terminated the tenancy agreement before the end of the fixed term. Here, redemptions are analysed according to the duration of the contract in particular time bands. For each time band, enter the total number of such transactions. K3.7 to K3.9 Transfers and Disposals Transfers This covers SRB agreements which are sold or transferred to third parties, but where the contract itself remains in being. The analysis looks into the status of each SRB agreement when it is sold or transferred. Firms should report:

original SRB values: the gross sales value paid to the seller;
current SRB values: the book value of the contract at time of
sale/transfer; and
actual disposal/transfer values: the value of the contract as
recognised in the agreement with the acquiring party.
Disposals
This covers disposals made during the normal course of business, and does not include business transfers. This is a further analysis of ‘disposals’ reported in K1.3. Firms should report:

original SRB values: the gross sales value paid to the seller;
current SRB values: the book value of the contract at time of
disposal; and
actual disposal/transfer values: the price obtained on sale (before
deducting any costs of sale).
K4 SRB agreements at end of quarter: cases 10% or more in arrears Firms should report those SRB contacts where the total amount of arrears on rental payments is 10% or more of the annual rental amount. Cases should be allocated to the relevant arrears band according to the percentage in arrears. For each arrears band, report the number of such cases, and the amount of arrears, and the amount of the expected annual rent on these cases. K5 SRB administrators Firms holding SRB administration permissions must complete the number of regulated SRB agreements that they administer, the number of non-regulated SRB agreements that they administer and the number of SRB agreements that they administer for other firms. The agreements administered for third parties must be further broken down by the number of SRB agreements administered for the largest five firms that they administer regulated SRB agreements for.

SECTION L: CREDIT RISK
INTRODUCTION
The purpose of this data item is so that a firm can provide an analysis of its credit risk capital requirement as calculated under MIPRU 4.2A, 4.2B and 4.2C. This data item is only relevant to firms that meet the criteria set out in note 2 of SUP 16.12.18BR in the FCA’s handbook. If that is the case then all relevant exposures must be included in the credit risk capital requirement calculation. See MIPRU 4.2A.4R. Please note that this data item is intended to be a summary of the credit risk capital calculation as calculated under MIPRU 4.2A, 4.2B and 4.2C and is not a detailed work schedule. Data elements: These are referred to by row first then by column, so data element 2B will be the row numbered 2 in column B.
Section L is structured in three parts. The first part (rows 1-7) focuses on the
breakdown of the credit risk capital requirement by types of exposure. The second
part (rows 8-14) is a memo section that requests further detail on specific elements
that will already be incorporated within the first part. The third part (rows 15 and 16) requests transaction level information on a firm’s securitisations.
Part 1 – Rows 1 to 7
This part of the data item focuses on providing a breakdown of a firm’s credit risk capital requirement under the two categories of ‘loans/exposures that are not securitised’ and ‘loans/exposures securitised’. The category ‘loans/exposures not securitised’ is further broken down into four loan/exposure types. A firm should report its credit risk capital requirement across the five loan/exposure types under the two categories of ‘loans/exposures that are not securitised’ and ‘loans/exposures securitised’ in rows 1 to 5. Please note: This part cannot be used as a worksheet to calculate the credit risk capital requirement for each loan/exposure type, because some loan/exposure types may contain more than one risk weighting within the row. Row 1 – Loans with mortgages on residential property A firm should include all loans entered into with mortgages on residential property that have not been securitised in this row. This includes loans that are past due, buyto-let loans on residential property, second charge and subsequent mortgages on residential property, and mortgages on residential property irrespective of the loan to value. Row 2 – Loans with mortgages on commercial property A firm should include all loans with mortgages on commercial property that have not been securitised in this row. This includes loans that are past due, buy-to-let loans on commercial property, and second charge and subsequent mortgages on commercial property.

A firm should include in this row all loans that are not included in rows 1, 2, 4 and 5. Row 4 – Collective Investment Undertakings A firm should include all positions in collective investment undertakings in this row. Row 5 – Securitisation (originated only) A firm should include all positions in assets that have been included in securitisations originated by the firm in this row. Rows 15 and 16 request further detail on these exposures. See MIPRU 4.2B for more information on calculating the credit risk capital requirement for securitisations. Column A A firm should report the exposure value of assets for each of the five loan/asset types. This should be the balance sheet value (i.e. net of any provisions). See MIPRU 4.2A.6R. Column B A firm should report here the amount of credit risk mitigation for each of the five loan/asset types. See MIPRU 4.2C. Column C A firm should report here any other credit valuation adjustments for each of the five loan/asset types. Column D For each of the five loan/asset types, a firm should report the total risk weighted exposure amount. A firm should have regard to MIPRU 4.2A.7R to MIPRU 4.2A.18G when calculating risk weighted exposure amounts1. Column E This contains the credit risk capital requirement for each of the five loan/asset types, which is 8 per cent of the relevant risk weighted exposure amount in Column D. Columns F and G These are memorandum item columns. For each of the five loan/exposure types, a firm should report the total value of individual (specific) and collective (general) impairment balances/provisions that were made BEFORE arriving at the balance sheet exposure value of loans/exposures reported in Column A. 5A Total exposure value of securitisations This is the total exposure value of assets that have been securitised and originated by the firm. This should equal the sum of the value of assets reported in columns B, C and D of the table in element 15. 6A Total Exposure Value This is the total balance sheet value of assets that have been included in the credit risk capital requirement calculation, being the sum of data elements 1A to 5A. This should also be the value of assets reported in data element C4.2a in MLAR Section C. 7E Total credit risk capital requirement This is the total credit risk capital requirement, being the sum of data elements 1E to 5E. This should also be the credit risk capital requirement reported in data element

1 www.prarulebook.co.uk/rulebook/Glossary/FullDefinition/66169/06-03-2016.

C4.6(c) in MLAR Section C.

Part 2 – Rows 8 to 14
This part of the data item contains memorandum items on specific elements that have already been recorded in Rows 1 to 7. The aim of this part of the data item is to obtain targeted prudential information on certain loan types. As a result, a firm should not omit data from Part 2, because a firm has already included that data in Part 1. Equally, a firm should not omit data from Part 1, because the data will be included in Part 2. For example, if a firm has a past due loan on a mortgage on a residential property, that data should be included in the credit risk capital requirement calculation in row 1 and in row 8. Another example is a second charge mortgage on a residential property, where the data will be included in the row 1 and in row 13. Column A A firm should report the exposure value of assets for each specific loan type. This should be the balance sheet value (i.e. net of any provisions). See MIPRU 4.2A.6R. Column D For each specific loan type, a firm should report the total risk weighted exposure amount. A firm should have regard to MIPRU 4.2A.7R to MIPRU 4.2A.18G when calculating risk weighted exposure amounts. Column E This contains the credit risk capital requirement for each specific loan type, which is 8% of the relevant risk weighted exposure amount in Column D. Columns F and G For each specific loan type, a firm should report the total value of individual (specific) and collective (general) impairment balances/provisions that were made BEFORE arriving at the balance sheet exposure value reported in Column A. Row 8 – Past due item on loans with mortgages on residential property A firm should report in this row all past due loans with mortgages on residential property. See MIPRU 4.2A.17R. Row 9 – Past due item on loans with mortgages on commercial property A firm should report in this row all past due loans with mortgages on commercial property. See MIPRU 4.2A.17R. Row 10 – Past due items on other loans A firm should report in this row all past due loans on other loans. See MIPRU 4.2A.17R. Row 11 – Buy-to-let mortgages on residential property A firm should report in this row all buy-to-let mortgages on residential property. Row 12 – Buy-to-let mortgages on commercial property A firm should report in this row all buy-to-let mortgages on commercial property. Row 13 – Second charge mortgages on residential property A firm should report in this row all second charge and subsequent mortgages on residential property. 66

Row 14 – Second charge mortgages on commercial property A firm should report in this row all second charge and subsequent mortgages on commercial property.
Part 3 – Rows 15 and 16
This part of MLAR Section L provides transaction-level information on the securitisations that a firm has originated. A firm will report each securitisation programme in a different row and complete columns A to L for each securitisation programme. Column A A firm should report the name of the securitisation programme. Columns B, C and D A firm should record the value of the securitisation that has been retained by the firm under each of the headings: Senior, Mezzanine and Equity. For the purposes of completing columns B, C and D of Part 3 of MLAR section L, Senior is the value of securitisation tranches that have credit quality step 1 (see the appropriate standardised approach table at www.fca.org.uk/your-fca/documents/fsaecais-securitisation), Equity is the value of securitisation tranches that have credit quality step 4, 5 or ‘all other credit assessments’ and Mezzanine is the value of securitisation tranches that are not Senior or Equity tranches. Purely for the purposes of completing columns B, C and D of Part 3, all unrated securitisation tranches should be classified as equity tranches. Columns E, F and G A firm should record the value of the securitisation that has been purchased by investors (and therefore no longer being held by the firm) under each of the headings:
Senior, Mezzanine and Equity.
For the purposes of completing columns E, F and G of Part 3 of MLAR section L, Senior is the value of securitisation tranches that have credit quality step 1 (see the appropriate standardised approach table at www.fca.org.uk/your-fca/documents/fsaecais-securitisation), Equity is the value of securitisation tranches that have credit quality step 4, 5 or ‘all other credit assessments’ and Mezzanine is the value of securitisation tranches that are not Senior or Equity tranches. Purely for the purposes of completing columns E, F and G all unrated securitisation tranches should be classified as equity tranches. Column H This is the total credit risk capital requirement for the assets that are included in the securitisation programme but before the effect of the securitisation. The value reported in this column should be based on all assets included in the securitisation programme even though a firm will subsequently retain only a portion of the securitisation. Column J This is the total credit risk capital requirement for the securitisation programme that has been retained by a firm based on the credit risk weights in MIPRU 4.2B. Column K

68
This is the total significant risk transfer add-on that should be added to the capital requirement for the securitisation programme. Column L This is the total credit risk capital requirement for the securitisation programme. This should be the sum of columns J and K for each securitisation programme. 16L Total capital requirement after securitisation This is the total capital requirement for securitisation positions originated by a firm. This should equal the value reported in 5E.

SECTION M: LIQUIDITY
INTRODUCTION
The purpose of this data item is for a firm to confirm that it complies with the liquidity resources requirements in MIPRU 4.2D. This data item is only relevant to a firm that does not have a restriction on its Part 4A permission that prevents it from undertaking new home financing or home finance administration (with mortgage assets on balance sheet) connected to regulated mortgage contracts. In relation to the questions in MLAR Section M Liquidity Questionnaire (with the exception of question 2), a firm should, as appropriate, answer “yes”, “no”, or “not applicable” For those questions where the answer is “no” or “not applicable” a firm must explain why in column B.
Part 1 – Adequacy of liquidity resources
Question 1 – In answering this question a firm should have regard to MIPRU 4.2D.2R and MIPRU 4.2D.3G. If a firm answers “no” or “not applicable”, it should explain why in column B and the firm does not need to complete the rest of MLAR Section M. Question 2 – In deciding on the amount of liquidity resources that a firm holds or is able to generate a firm should have regard to MIPRU 4.2D.3G. The figure should be entered in 000’s.
Part 2 – Systems and controls
Question 3 – In answering this question a firm should have regard to MIPRU 4.2D.4R and MIPRU 4.2.D.5R. Please note that Part 5 of MLAR Section M covers senior management oversight separately.
Part 3 – Stress testing
Question 4 – In answering this question a firm should have regard to MIPRU 4.2D.8R, MIPRU 4.2D.10R and MIPRU 4.2D.11G. Question 5 – In answering this question a firm should have regard to MIPRU 4.2D.8R, MIPRU 4.2D.9R(1) and (2), MIPRU 4.2D.10R and MIPRU 4.2D.11G. Question 6 – In answering this question a firm should have regard to MIPRU 4.2D.9R(1) and (2). Question 7 - In answering this question a firm should have regard to MIPRU 4.2D.9R(3).

Part 4 – Contingency funding plans
Question 8 - In answering this question a firm should have regard to MIPRU 4.2D.13R. Question 9 - In answering this question a firm should have regard to MIPRU 4.2D.13R(2)(a).
Part 5 – Senior management oversight
Question 10 - In answering this question a firm should have regard to MIPRU 4.2D.6R. Question 11 – In answering this question a firm should have regard to MIPRU 4.2D.7R. Question 12 – In answering this question a firm should have regard to MIPRU 4.2D.10R, MIPRU 4.2D.13R and MIPRU 4.2D.14R.

FCA 2017/XX
Appendix 2 of PRA CP45/16 / FCA CP16/41 available at
http://www.bankofengland.co.uk/pra/Pages/publications/cp/2016/cp4516.aspx SUPERVISION MANUAL (REPORTING No [x]) INSTRUMENT 2017 Powers exercised A. The Financial Conduct Authority makes this instrument in the exercise of the following powers and related provisions in the Financial Services and Markets Act 2000 (“the Act”):
(1) section 137A (The FCA’s general rules); (2) section 137T (General supplementary powers); and (3) section 139A (Power of the FCA to give guidance). B. The rule-making powers listed above are specified for the purpose of section 138G(2) (Rule-making instruments) of the Act. Commencement
C. This instrument comes into force on 30 June 2017.
Amendments to the Handbook
D. The Supervision manual (SUP) is amended in accordance with the Annex to this instrument. Citation E. This instrument may be cited as the Supervision Manual (Reporting No [x]) Instrument 2017. By order of the Board [date]

FCA 2017/XX
Annex
Amendments to the Supervision manual (SUP) In this Annex underlining indicates new text and striking through indicates deleted text, unless otherwise stated. 16 Reporting requirements … 16
Annex
19AAR
Mortgage Lenders & Administrators Return (‘MLAR’) – sub-forms for second charge regulated mortgage activity …

FCA 2017/XX

FCA 2017/XX
…
16 Annex
19BG
NOTES FOR COMPLETION OF THE MORTGAGE LENDERS & ADMINISTRATORS RETURN (‘MLAR’) Contents Introduction: General notes on the return
Section A: Balance Sheet
Section B: Profit & Loss Account
Section C: Capital
Section D: Lending: Business Flows & Rates
Section E: Residential Lending to Individuals: New Business Profile
Section F: Lending: Arrears Analysis
Section G: Mortgage Administration: Business profile
Section H: Mortgage Administration: Arrears analysis
Section J: Fee tariff measures
Section K: Sale and rent back business
Section L: Credit risk
Section M: Liquidity
INTRODUCTION: GENERAL NOTES ON THE RETURN

Introduction
This section covers a number of points that have relevance across the return generally:
 Overview
 Purpose of reporting requirements
 Regulated mortgage contracts and the wider mortgage market  Home reversion plans and Home purchase plans  Sale and rent back business

FCA 2017/XX
 Accounting conventions
 Accuracy
 Time period
 Loans made before 31 October 2004
 Second charge regulated mortgage contracts  Specific items:
(i) positions to be reported gross
(ii) foreign currencies
2. Overview of reporting requirements
The data requirements for firms carrying on the regulated activities of home finance providing activity and administering a home finance transaction consist of quarterly, half yearly and annual information. This guidance deals only with the quarterly requirements, however, which are referred to as the Mortgage Lenders and Administrators Return (MLAR). The remaining data requirements are applied to firms through existing rules within the following sections of the Handbook:
 the Dispute resolution: Complaints sourcebook for complaints reporting; and  Chapter 16 of the Supervision manual for controllers reports (section 16.4), close links report (section 16.5) and annual accounts (section 16.12). Because the MLAR is activity based, not all sections are applicable to all types of home finance activity firm. The applicability of each section is explained in the
table below:
Section Applicability:
A1 and A2: Balance sheet
Applies to all home finance activity firms except:
 A firm that is required to submit a balance sheet by a lower numbered regulated activity group, as described in SUP 16.12.3R(1)(a)(iii)  An incoming EEA firm (note a) A3: Analysis of loans to customers Applies to all home finance activity firms A4: Analysis of second Applies to all home finance activity firms in respect

FCA 2017/XX charge loans to customers of second charge regulated mortgage contracts. B1: Income statement Applies to all home finance activity firms except:
 A firm that is required to submit an income statement by a lower numbered regulated activity group, as described in SUP 16.12.3R(1)(a)(iii)  An incoming EEA firm (note a) B2: Provisions analysis Applies to all home finance activity firms C: Capital Applies to all home finance activity firms except:
 A firm that is required to submit a capital adequacy data item by a lower numbered regulated activity group, as described in SUP 16.12.3R(1)(a)(iii)  An incoming EEA firm (note a)  A firm which is a solo-consolidated subsidiary of an authorised credit institution  A firm which exclusively carries on home finance activities in relation to second charge regulated mortgage contracts, as set out in SUP 16.12.18BR (note 4). D: Lending: business flows and rates Applies to all firms with permission to undertake a home finance providing activity except:
 SRB agreement providers
 SRB administrators
D(a): Second charge business flow and rates Applies to all home finance providing activity firms in respect of second charge regulated mortgage contracts. E: Residential lending to individuals: new business profile Applies to all firms with permission to undertake a home finance providing activity except:
SRB agreement providers
SRB administrators
E1(a) and E2(a): Second charge lending to individuals Applies to all home finance providing activity firms in respect of second charge regulated mortgage contracts. F: Lending: Arrears Analysis Applies to all firms with permission to undertake a home finance providing activity except:

FCA 2017/XX
 SRB agreement providers
 SRB administrators
F(a): Second charge lending: Arrears analysis Applies to all home finance providing activity firms in respect of second charge regulated mortgage contracts. G: Mortgage Administration: Business Profile Applies to all firms with permission to undertake administering a home finance transaction, except:
 SRB administrators
H: Mortgage
Administration: Arrears analysis
Applies to all firms with permission to undertake administering a home finance transaction, except:
 SRB administrators
H(a): Second charge mortgage administration:
Arrears analysis
Applies to all firms with permission to undertake administering a home finance transaction, in respect of second charge regulated mortgage contracts. J: Fee tariff measures Applies to all home finance activity firms K: Sale and rent back business Applies to SRB agreement providers and SRB administrators L: Credit risk Applies to a firm that meets the conditions of SUP 16.12.18BR (notes 2 and 4). M: Liquidity Applies to a firm that meets the conditions of SUP 16.12.18BR (notes 3 and 4). Note (a): Credit Institutions passporting under BCD for mortgage lending (which also includes mortgage administration), or other firms passporting under another EU Directive for a non-mortgage activity and holding a top-up permission from the appropriate regulator for mortgage lending and/or mortgage administration. Also includes firms classed as "Treaty firms" under Schedule 4 of the Act. But any other EEA firm type should complete in full all sections of the MLAR described above this table, as it would not be eligible for any reduction in reporting requirements.
3. Purpose of reporting requirements
The reasons why the appropriate regulator FCA requires this data from home finance providers and administrators are as follows:
 to assess the probability of the failure of firms and the impact of failure on the ability of the appropriate regulator FCA to meet its statutory objectives, including an assessment of compliance with the threshold

FCA 2017/XX conditions;
 to assist with prudential supervision of firms; and  to help assess the risks in the home finance market as a whole to inform, for example, the appropriate regulator’s FCA’s thematic work. By this we mean that we will use some of our supervisory resources to examine issues (known as ‘themes’) that affect a number of firms rather than firms individually. The data collected will be considered alongside other information we receive, to identify trends and issues that inform our supervision of firms. The MLAR requires home finance providers and administrators to submit four types of data:
 financial data to assist in the prudential supervision of home finance providers and administrators. A quarterly financial return is required, including a balance sheet and profit and loss account;  quarterly reporting of quantitative and qualitative data by all home finance providers and administrators to enable monitoring of compliance with the requirements of MCOB;  quarterly provision of qualitative home finance information by all home finance providers and administrators to enable the appropriate regulator FCA to understand developments in the home finance markets as a whole, and to inform future policy developments and prudential supervision; and  quarterly annual reporting of information on fee tariff measures. The reporting requirements set out in the MLAR will enable the appropriate regulator FCA to realise these information needs. In particular:
Tables A to C, L, M: provide the framework for the appropriate regulator’s FCA’s financial monitoring and prudential supervision of home finance providers and administrators; Tables D to F: provide the framework for the provision of qualitative home finance information by home finance providers;
Table Tables G, H: provides provide the framework for the appropriate
regulator’s FCA’s monitoring of administering a home finance transaction activity. ;
Table J: provides information on fee tariff measures for home
finance providers and administrators. ;
Table K: provides the framework for the appropriate
regulator’s FCA’s monitoring of SRB agreement providers and SRB administrators .

FCA 2017/XX
4. Regulated mortgage contracts and the wider mortgage market
Given this background to reporting requirements, the appropriate regulator’s FCA’s approach to obtaining information on mortgage lending has been structured so that regulated mortgage contracts are seen within the wider context of the UK mortgage market as a whole. This approach can be illustrated as follows:
Structural approach
Each of these key terms is explained below:
(i) UK Mortgage mortgage market
This refers to all lending secured on land and buildings in the United Kingdom, whether to individuals, housing associations or corporates. However, given the importance of mortgages to individuals we have chosen to look at the market in terms of two components, namely 'residential lending to individuals' and 'other secured lending'. Loans and mortgages secured on land in the EEA other than the UK should be reported in ‘other loans’ in section A3 of the MLAR. (ii) Residential loans to individuals This is a discrete category of the mortgage market, and has characteristics (e.g. in terms of products, lending criteria and methods of credit assessments) that are often markedly different from those applying to other types of secured lending (e.g. to corporates). It is lending to individuals secured by mortgage on land and buildings where the lender has either a first or second (or subsequent) charge, where at least 40% of the land and buildings is used for residential purposes, and where the premises are for occupation by either the borrower (or dependant), or any other third party (e.g. it includes ‘buy to let’ lending to individuals). Only loans where there is a one-to-one correspondence between the UK Mortgage market Regulated mortgage contracts Residential loans to individuals Non-regulated mortgage contracts Other secured loans

FCA 2017/XX loan and a specific security should be included within ‘residential loans to individuals’. Do not include here any residential loans to individuals that are part of a ‘business loans’ type package (involving multiple loans and multiple securities, where there is no one-to-one correspondence between a loan and a specific security), but report them under ‘other secured lending’. Regulated mortgage contracts that are secured on UK land are therefore a subset of this market category. Examples of non-regulated mortgage contracts which fall under the wider category of residential loans to individuals include: buy-to-let loans and other types of loan where the property is not for use by the borrower (or qualifying dependants). Prior to 21 March 2016, nonregulated mortgage contracts also included second charge mortgage lending. (iii) Other secured lending This covers all other forms of lending secured on land and buildings in the United Kingdom. Primarily it covers secured lending to corporate bodies (including to housing associations), but it also includes lending to individuals which, although being secured on land and buildings, is not deemed to be residential (e.g. the residential element is less than 40%). A corporate body for this purpose is any entity other than an individual. Loans and mortgages secured on land in the EEA other than the UK should be reported in ‘other loans’ in
section A3 of the MLAR.
It also includes any residential lending to an individual that forms part of a ‘business loan’ type package. These arrangements between a lender and a borrower are usually offered by a lender’s specialist business or corporate lending departments. They typically involve a number of loans secured against a range of securities including the borrower’s residential property, business premises and the business itself. Such packages involve no specific one-to-one correspondence between a single loan and a single security, and instead the lender assesses loan cover against the basket of securities in the package. Given the business nature of this type of lending, it would therefore be misleading to try and classify some or all of the loan elements in such cases to any part of ‘residential lending to individuals’, and hence all such lending should be reported under ‘other secured lending’. This is for MLAR reporting purposes only; the actual categorisation or treatment for MCOB purposes remains unchanged. (iv) Regulated mortgage contract This is defined in the Handbook as follows:
(a) (in relation to a contract) (in accordance with article 61(3) of the Regulated Activities Order) a contract which, at the time it was entered into, meets the following conditions:

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(i) a lender provides credit to an individual or to trustees (the ‘borrower’); and (in accordance with article 61(3) of the Regulated Activities Order) at the time it is entered into, meets the following conditions:
(A) a lender provides credit to an individual or to trustees (the ‘borrower’); and (B) the obligation of the borrower to repay is secured by a mortgage on land in the EEA, at least 40% of which is used, or is intended to be used, in the case of credit provided to an individual, as or in connection with a dwelling; or (in the case of credit provided to a trustee who is not an individual), as or in connection with a dwelling by an individual who is a beneficiary of the trust, or by a related person; (ii) the obligation of the borrower to repay is secured by a mortgage on land in the EEA, at least 40% of which is used, or is intended to be used, as or in connection with a dwelling or (in the case of credit provided to trustees), as or in connection with a dwelling by a related person. is not a home purchase plan, a limited payment second charge bridging loan, a second charge business loan, an investment property loan, an exempt consumer buy-tolet mortgage contract, an exempt equitable mortgage bridging loan, an exempt housing authority loan or a limited interest second charge credit union loan within the meaning or article 61A(1) or (2) of the Regulated Activities Order; and (iii) if the contract was entered into before 21 March 2016:
(A) at the time the contract was entered into, entering into the contract constituted the regulated activity of entering into a regulated mortgage contract; or (B) the contract is a consumer credit back book mortgage contract within the meaning of article 2 of the MCD Order. (b) (in relation to a specified investment) the investment, specified in article 88 of the Regulated Activities Order, which is rights under a regulated mortgage contract within (a). [Note: articles 3(1)(a) and 4(2) of the MCD] Loans and mortgages secured on land in the EEA other than the UK, although regulated mortgages, should be reported in ‘other loans’ in

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section A3 of the MLAR.
This means that in relation to a regulated mortgage contract, the following conditions must all be satisfied:
 the borrower must be an individual or trustee;  the lender must take a mortgage over EEA property; and  the property must be at least 40% occupied as a dwelling. The definition of a regulated mortgage contract means that many kinds of loan are caught by regulation, not just loans for house purchase. For example it includes a significant amount of short-term lending. This includes lending for home improvements (including some in-store credit), lending for debt consolidation, lending to finance a business, and some specific banking products such as secured overdrafts, secured credit cards, bridging loans and loans secured by all monies charges. (v) Second charge regulated mortgage contract A second charge regulated mortgage contract is defined in the Handbook as a regulated mortgage contract which is not a first charge legal mortgage. Therefore, it includes second and subsequent charge mortgages. Data which is provided in relation to a second charge regulated mortgage contract in A3(a), D (a), E(1)(a), E(2)(a), F(a), or H(a) in SUP 16 Annex 19AAR will also need to be provided as part of the data items in A3, D, E, F or H, as the case may be, in SUP 16 Annex 19AR. The guidance on how to submit the data items in A3, D, E, F or H of SUP 16 Annex 19AR applies to A3(a), D(a), E(1)(a), E(2)(a), F(a) or H(a) of SUP 16 Annex 19AAR where the same terms are used in the corresponding parts of SUP 16 Annex 19AAR. 4a. Home reversion and home purchase plans Definitions (1) Home reversion plan This is defined in the Handbook as follows:
(in accordance with article 63B(3) of the Regulated Activities Order) an arrangement comprised in one or more instruments or agreements which meets the following conditions at the time it is entered into:
(a) the arrangement is one under which a person (the reversion provider) buys all or part of a qualifying interest in land from

FCA 2017/XX an individual or trustees (the reversion occupier); (b) the reversion occupier (if he is an individual) or an individual who is a beneficiary of the trust (if the reversion occupier is a trustee), or a related person, is entitled under the arrangement to occupy at least 40% of the land in question as or in connection with a dwelling and intends to do so; and (c) the arrangement specifies that the entitlement to occupy will end on the occurrence of one or more of:
(i) a person in (b) becoming a resident of a care home; (ii) a person in (b) dying; or (iii) the end of a specified period of at least twenty years from the date the reversion occupier entered into the arrangement; in this definition "related person" means:
(A) that person’s spouse or civil partner; (B) a person (whether or not of the opposite sex) whose relationship with that person has the characteristics of the relationship between husband and wife; or (C) the person’s parent, brother, sister, child, grandparent or grandchild. Guidance to Home Reversion (HR) and Home Purchase Plan (HPP) firms on the completion of the MLAR This section covers the interim reporting of HR and HPP products pending the outcome of the appropriate regulator's wholesale review of the MLAR under the appropriate regulator's agenda of Better Regulation. It is recognised that HR and HPP products are not loans as such, being effectively sale and lease products. However, in order to use the MLAR as a vehicle for capturing some data on these products, they are to be treated for MLAR purposes as if they were loan products. This means that:
(i) For a firm which is a provider of HR and/or HPP products:
 HR and HPP products are to be included in the balance sheet within A1.6 "Loans to Customers". This may differ from the reporting of such products in a firm's published accounts.  Within section A3, which contains a further breakdown of "Loans to Customers", HR and HPP products are to be reported within the single category A3.5 "Other Loans".

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 As a consequence, the appropriate regulator FCA will be able to capture the key balances outstanding on these products (including any which may have been securitised) during the interim period. (ii) For a firm which is undertaking administration of HR and/or HPP products (and where that firm did not also act as provider of these products):
 HR and HPP products being administered for third parties are to be reported in section G .  Within G1 and G2 they are to be reported within the "Other firms" category. They should however be shown under "regulated loans" solely for the purposes of recording their administration in the MLAR.  In section G2.2, when entering the "name of firm" in column 2, add "HR" and/or "HPP" in brackets after the name, as appropriate.  However, for this interim period of reporting, the appropriate regulator does not propose to seek information about any arrears on HR and/or HPP products and hence such information should be excluded from section H. 4b. Sale and rent back (SRB) agreement business Definitions A Regulated regulated sale and rent back agreement . This is defined in the Handbook Handbook as follows:
(in accordance with article 63J(3)(a) of the Regulated Activities Order) an arrangement comprised in one or more instruments or agreements, in relation to which the following conditions are met at the time it is entered into:
(a) the arrangement is one under which a person (an agreement provider) buys all or part of the qualifying interest in land in the United Kingdom from an individual or trustees (the "agreement seller"); and (b) the agreement seller (if he is they are an individual) or an individual who is the beneficiary of the trust (if the agreement seller is a trustee), or a related person, is entitled under the arrangement to occupy at least 40% of the land in question as or in connection with a dwelling, and intends to do so; but excluding any arrangement that is a regulated home reversion plan. Guidance to regulated sale and rent back ( SRB ) firms on the

FCA 2017/XX completion of the MLAR
This section explains how SRB firms should complete the MLAR. SRB providers and administrators should complete the following sections of the MLAR:
 Section A (balance sheet);
 Section B (profit and loss account);
 Section C (capital);
 Section J (fees tariff measures): and  Section K (sale and rent back business). SRB firms should not complete sections D to H, L or M in respect of their SRB business. SRB providers should note the following in relation to their reporting of SRB agreements and SRB assets:
In section A
 Do not enter any information on SRB agreements in A1.6 ‘Loans to customers’ or A3.5 ‘Other loans’.  Report SRB assets in A1.11.  Report any liabilities incurred in acquiring SRB assets in A2.7. In section B  Where applicable, information on SRB agreements should be entered in B2.5 ‘Other loans’. As a consequence the appropriate regulator FCA will be able to capture key information on these products.
5. Accounting conventions
Unless the contrary is stated in these guidance notes, the return should be compiled using generally accepted accounting practice. However, information in respect of lending (e.g. balances, advances, interest rates, arrears etc) to be reported in sections D, E, F, G, H and J of the return should not be fair-valued but should report the contractual position (i.e. as between lender and borrower). All amounts should be shown in one of the reporting currencies accepted by the relevant platform provided by the FCA, unless otherwise specified in the Handbook.

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6. Accuracy
It is expected that entries on the return will be actual values, or in some cases close approximations established or drawn from the firm’s systems and prepared on the basis of being the best information in the time available for their compilation. If such 'close approximations' are considered by the firm as likely to be materially different from the underlying actual values, the firm should advise its supervisory team of data items affected.
7. Time periods
Where stock figures are required (e.g. balance sheet, capital position etc) the information is required as at the firm’s accounting reference date and the three quarter ends following this date (see SUP 16.3.13R). Where flow figures are required, these are either for 3 months only (i.e. the latest quarter) as in for example lending figures in tables D and E, or cumulative in the 'year to date', (e.g. profit and loss in table B etc), covering the period from the firm’s accounting reference date to the end of the reporting quarter.
8. Loans made before 31 October 2004
This section does not apply to second charge regulated mortgage contracts. (i) Classifying the ‘back book’ Many loans made before 31 October 2004 became regulated as regulated mortgage contracts on 21 March 2016 or, depending on the nature of the loan and the applicable transitional provisions, on a date no later than 21 March 2017; these loans should be treated as regulated mortgage contracts in the MLAR accordingly. Loans made before 31 October 2004 which continue not to be regulated as regulated mortgage contracts fall into the following categories:
 residential loans to individuals (see Introduction, section 4(ii)) which, for the purposes of the MLAR, should be classified as non-regulated ((see Introduction, section 4(ii)) and e.g. as at A3.3, and D1.2 etc.)  other secured loans (see Introduction, section 4(iii)) and shown for example at A3.4, D1.3 etc.)  other loans [ (see Guidance for A3.5] ) The approach to classification for pre-31 Oct 2004 loans will, of necessity, need to be a pragmatic one. We do not, for example, envisage the need to look at individual paper loan files. Rather, we expect that a firm the firm will to apply its knowledge of its various loan books, products & and their characteristics, to come up with some realistic allocation rules. This will then enables the firm firm to apply some automatic process to its computerised

FCA 2017/XX loan records, and thereby classify individual loans into each of the relevant categories used in the MLAR MLAR. Such a process may not be perfect, and it may result in a few loans being wrongly allocated, but it will be sufficient for the purpose. In many cases, there will be further transactions in relation to this type of loan in the period immediately following 31 October 2004, and this event will provide an opportunity for the loan classification to be reassessed, and if necessary, revised. (ii) Specific treatment of residential loans to individuals Any loans made before 31 October 2004, that have not become regulated as regulated mortgage contracts, should be reported as non-regulated loans in the various parts of the MLAR. This reporting basis for loans should continue until such time, if ever, that a subsequent transaction on the loan causes it to be formally treated as a regulated contract. (iii) Further advances on loans made before 31 October 2004 which have not already become regulated as regulated mortgage contracts We cannot be prescriptive about whether, after the onset of mortgage regulation, a further advance (or any other variation) to a pre-31 October 2004 mortgage which has not already become regulated as a regulated mortgage contract (see (i) above) will have the effect of creating a new regulated mortgage contract. Whether a variation amounts to creating a new contract will depend on each lender's individual mortgage documentation. This documentation will differ, possibly significantly, between firms firms. Each lender will need to review its existing documentation and take a view on the scope that this provides for making changes. In practice this means that:
 if the lender can make a further advance without creating a new contract (i.e. makes a variation to the existing mortgage contract), then the further advance should be added to the original loan and the combined loan treated as a single loan for MLAR MLAR reporting. This combined loan should be reported as ‘non-regulated’;  if making a further advance creates a new contract, (and this further advance is a regulated mortgage contract) then the correct reporting approach will be determined as follows:
(a) where the original loan was made before 31 October 2004, has not in the meantime become a regulated mortgage contract (for example, because it is not a regulated credit agreement) but would otherwise satisfy the specific requirements of a regulated mortgage contract, and the further advance is documented in a new loan agreement separate from the original loan (and is not a variation to the existing mortgage contract), the original loan and further advance may be treated as one for MLAR MLAR

FCA 2017/XX reporting, being shown as “Regulated” under “Residential loans to individuals”; (b) where the original loan did not satisfy the defined conditions of a regulated mortgage contract at the time it was entered into and has not in the meantime become a regulated mortgage contract, and the further advance is documented in a new loan agreement separate from the original loan (and is not a variation to the existing mortgage contract), the old loan and further advance will be treated as two separate loans for most aspects of MLAR MLAR reporting, the former being ‘unregulated’ while the latter will be reported as ‘regulated’. However, for the LTV and Income Multiple analysis, while the firm should only show the amount of the further advance in the relevant “cell”, the “cell” should be determined by using the total amount of the loan (old loan + further advance) when deciding which LTV band and which Income Multiple band are applicable; and (c) where the lender decides to combine the original loan and the further advance to create a single new contract that replaces the existing mortgage contract and is a regulated mortgage contract, this should be reported as ‘regulated’.
9. Specific items
(i) Positions to be reported gross
In general, liabilities and assets should be shown gross, and not netted off (unless there is a legal right of set-off). Thus an account which moves from credit to debit will move from one side of the balance sheet to the other. A notable exception to this however concerns the reporting of loan assets, which should follow MIPRU 4.2.14R to MIPRU 4.2.16G. Such assets should be shown in the balance sheet net of linked funding and also on this basis in other tables where balances are reported on the same basis. Only sections A3, D2, G and H require the reporting of such loan assets on a ‘gross’ basis. The treatment of loan assets that are being operated as part of a current account offset mortgage product (or similar products where deposit funding is offset against loan balances in arriving at a net interest cost on the account) will depend on the conditions pertaining to the mortgage product. The balance outstanding on such loans will need to be reported on the basis of the contractually defined balance according to the terms of the mortgage product. This might be the amount of loan excluding any offsetting funds, or it might be the net amount. (ii) Foreign currencies Firms should report in the currency of their annual audited accounts, where this is Sterling, Euro, US Dollars, Canadian Dollars, Swedish

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Kroner, Swiss Francs or Yen. Where annual audited accounts are reported in a currency outside those specified above, please translate these values into an equivalent within the list using an appropriate rate of exchange at the reporting date, or where appropriate, at the rates of exchange fixed under the terms of any relevant currency hedging transaction, and that value used in the return. Please report in thousands where stated on the return. Firms should apply the same accounting treatment as for their published accounts.
SECTION A: BALANCE SHEET
Balance sheet analysis
A1,
A2
The balance sheet is intended to reflect the practices used in compiling published or other accounts, although its format in the MLAR (with 'total assets' and 'total liabilities') will not necessarily be the same as that used by firms in their regular accounts. However, the differences should only be presentational ‘Loans to customers’ is expected to be the customer balance after any writeoffs have been taken. A1.6 Loans to customers may be a non-standard accounting sub-head for some firms whose business is not primarily mortgage related. But since this is an explicit MLAR data requirement, it should be split out from the sub-head under which it is routinely shown in the firm’s other accounts. Include HR and HPP products here. A1.11 Other current assets should include all assets measured at fair value not included in any other asset category on the return. Include any SRB assets here. A2.1 Shareholders' funds should include any unrealised gains or losses resulting from the fair valuation of available-for-sale financial assets, and any fair value gains or losses arising on cash flow hedges of financial instruments measured at cost or amortised cost. A2.7 Other liabilities should include all liabilities measured at fair value not included in any other liability category on the return. Include any liabilities incurred in acquiring SRB assets here. A3 Analysis of loans to customers This section recognises that some lenders may have securitised loans on their balance sheet, and hence provides for unsecuritised/securitised loans to be shown separately. Unsecuritised balances are analysed in terms of three elements:
gross loan balances (before deduction of any provisions); provisions balances in respect of those balances; and the net balances after deduction of such provisions.

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Securitised balances are analysed in a similar way, except that 'gross' also means before the deduction of any linked non-recourse funding, the amount of which is also to be shown separately. A3.1- 4 See Introduction (paragraphs 4(i) to (iv)) for details of the coverage of these terms. A3.5 Other loans refers to any lending secured on land and buildings outside of the UK UK, any loan for which security is provided other than by land and buildings, together with all unsecured loans (e.g. consumer credit, personal loans, or such loans to corporates). Loans and mortgages secured on land in the EEA other than the UK should be reported here. A3.6 It is expected that net balances on unsecuritised loans plus net balances on securitised loans will equal the entry shown at A1.6 in the main balance sheet analysis of assets.
SECTION B: PROFIT & LOSS ACCOUNT
B0 Financial year to date
In terms of reporting period, the analysis should be compiled on a ‘year to date’ basis, covering successively 3, 6, 9 or 12 months months from the firm’s accounting reference date. B1 Profit & Loss Account The P&L section is intended to reflect the practices used in compiling accounts prepared under the Companies Acts, although its format in the MLAR (with explicit focus on financial items such as interest, fees & commission etc) will not necessarily be the same as that used by firms in their regular accounts. The reason for this approach is that most lenders to which this
section is applicable are mortgage specialists, and as such it is
considered desirable to put their P&L format onto a similar basis as that used for banks and building societies. The analysis therefore requires the firm’s profit & loss account to be re-structured in a way that makes a number of items explicit in the interests of achieving consistency with other reporting firms. B1.1 Focuses on gross profit from non-financial activities . B1.2- 1.7 Covers a range of income elements which are more closely related to financial activities, including in particular those associated with mortgage lending. In particular B1.7 Other income should include unrealised gains in respect of assets and liabilities which have been measured on a fair value basis. B1.9- Covers a range of expenditure elements, including those related to

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1.13 non-financial and also to financial (including mortgage related)
activities. In particular B1.13 Other expenses should include unrealised losses in respect of assets and liabilities which have been measured on a fair value basis. B1.15 Operating Profit is total income less total expenses. B1.16 Provisions covers write-offs and provisions charges on bad and doubtful debts, (including for example on mortgage loans); any suspended interest (i.e. any interest included in Interest Receivable which, through loan default, impairment or otherwise, is deemed unlikely to be received); and any other provisions for contingent liabilities. B2 Provisions analysis This supplementary analysis draws together the key movements in provisions balances from the firm’s accounting reference date accounting reference date up to the reporting quarter end. The two ‘flow items’, namely write-offs and provisions charges, are those relating to the period from the firm’s accounting reference date accounting reference date up to the reporting date. The total of provisions charges in line B2.6 [(column 3]) will not necessarily be the same as the provisions charge in the Profit & Loss analysis at B1.16 (since this latter item may include further provisions against other asset items not included in B2.6, or provisions arising from other sources).
SECTION C: CAPITAL
INTRODUCTION
The threshold conditions state that the resources of a firm must be adequate in the opinion of the appropriate regulator FCA in relation to the regulated activities that the firm seeks to carry on or carries on. In addition, a firm is required to maintain 'adequate financial resources'. A home finance lender/administrator/ lender should have adequate capital and funding in order to be able to meet these requirements. In addition, the FCA and the PRA are required to identify the main risks to their statutory objectives. In assessing firm-specific risks we are required to assess the risks arising from the financial failure of a firm (due to business risks from the external environment, or control risks arising from the firm itself) which might affect both the market and individual customers. The specific FCA objectives that are potentially impacted are those relating to market confidence and consumer protection. Details provided in this Section on Capital are drawn from the appropriate provisions of MIPRU 4 (Capital Resources). C1-2 CAPITAL RESOURCES

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C1 and C2 set out the individual components of eligible capital and the separate deductions that should be made to arrive at capital resources. Components of eligible capital are:
(1) Share capital
Share capital must be fully paid (i.e. the firm is under no obligation to repay this capital unless and until the firm is wound up) and may include ordinary share capital or preference share capital (excluding preference shares redeemable by shareholders within two years). See paragraph (7) Subordinated loans below for details of the limits that may apply to the inclusion of redeemable preference shares in capital resources. (2) Partnership or sole trader capital Partnership capital is capital made up of the partners’ capital account. The capital account is an account into which capital contributed by the partners is paid and from which, under the terms of the partnership agreement, an amount representing capital may be withdrawn by a partner only if he they ceases to be a partner and an equal amount is transferred to another such account by his their former partners or any person replacing him them as their partner, or the partnership is otherwise dissolved or wound up. Sole trader capital is the net balance on the firm’s capital account and current account. (3) Reserves Reserves are accumulated profits retained by the firm (after deduction of tax, dividends and proprietors’ or partners’ drawings) and other reserves created by appropriations of share premiums and similar realised appropriations. Reserves also include gifts of capital, for example, from a parent company. For partnerships, reserves include partners’ current accounts according to the most recent financial statement. Reserves must be audited unless the firm is eligible to include unaudited reserves in its capital resources calculation under MIPRU 4.4.2R. The reserves figure is subject to the following adjustments, where appropriate:
(a) any unrealised gains must be deducted or, where applicable, any unrealised losses added back in on cash flow hedges of financial instruments measured at cost or amortised cost;

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(b) any unrealised gains must be deducted or, where applicable, any unrealised losses added back in on debt instruments held in the available-for-sale financial assets category. Any unrealised gains or losses on equities held in the available-for-sale financial assets category should be reported at C1.5; (c) in respect of a defined benefit occupational pension scheme, any defined benefit asset must be derecognised; A firm may substitute for a defined benefit liability the firm's deficit reduction amount provided that that election is applied consistently in respect of any one financial year financial year. (4) Interim net profits and partners’ interim current accounts A firm is not required to take into account interim net profits. However, if it does, the profits have to be verified by the firm’s external auditors, net of tax, anticipated dividends or proprietors’ drawings and other appropriations unless the firm is eligible to include unverified interim net profits in its capital resources calculation under MIPRU 4.4.2R. In terms of the verification for inclusion, for the first, second and third financial quarters firms may include interim profits in their MLAR, on the understanding that the firm will obtain the required verification from its external auditors within two months of the financial quarter end. (The appropriate regulator FCA may ask for a copy of the verification statement.) For the fourth quarter the appropriate regulator FCA will rely on the forthcoming audited accounts as providing verification and accordingly the full year’s profits should be included in the make-up of Eligible Capital under Interim Profits in the return. (5) Revaluation reserve Firms should report reserves relating to the revaluation of fixed assets. (6) General/collective provisions Firms should report general/collective provisions that are held against potential losses that have not yet been identified, but which experience indicates are present in the firm’s portfolio of assets. Such provisions must be freely available to meet these unidentified losses wherever they arise. General/collective provisions must be verified by external auditors and disclosed in the firm’s annual report and

FCA 2017/XX accounts annual report and accounts unless the firm is eligible to include unaudited general and collective provisions in its capital resources calculation under MIPRU 4.4.2R. (7) Subordinated loans Subordinated debt (i.e. the amount of principal outstanding before amortisation) must not form part of the capital resources of a firm unless it meets the following conditions:
(1) it has an original maturity of at least five years or is subject to five years’ notice of repayment; (2) the claims of the subordinated creditors must rank behind those of all unsubordinated creditors; (3) the only events of default must be non-payment of any interest or principal under the debt agreement or the winding up of the firm; (4) the remedies available to the subordinated creditor in the event of non-payment or other default in respect of the subordinated debt must be limited to petitioning for the winding up of the firm or proving the debt and claiming in the liquidation of the firm; (5) the subordinated debt must not become due and payable before its stated final maturity date except on an event of default complying with (3); (6) the agreement and debt are governed by the law of England and Wales, or of Scotland, or of Northern Ireland; (7) to the fullest extent permitted under the rules of the relevant jurisdiction, creditors must waive their right to set off amounts they owe the firm against subordinated amounts owed to them by the firm; (8) the terms of the subordinated debt must be set out in a written agreement or instrument that contains terms that provide for the conditions set out in (1) to (7); and (9) the debt must be unsecured and fully paid up. For a mortgage lender or mortgage administrator undertaking business connected to regulated mortgage contracts (unless its Part 4A permission prevents it from undertaking new business), MIPRU 4.4.8R limits the amount of subordinated loans and redeemable preference shares that

FCA 2017/XX can be included in eligible capital.
In Table C of the MLAR the firm will deduct from capital resources under item C2.3a any amount by which the subordinated loans and redeemable preference shares exceed the limit in MIPRU 4.4.8R. Treatment of eligible capital items (listed above) in section C1:
C1.1 Reserves: include items
 reserves
 Revaluation reserves
C1.2 Interim profits: include items
 interim net profits
 partners’ interim current accounts
C1.3 Issued capital: include items
 share capital
 partnership or sole trader capital
C1.3a Subordinated loans
C1.4 General/collective provisions
C1.5 Other eligible capital: includes
 any other item of eligible capital not required to be included in items C1.1 to C1.4, including any unrealised gains or losses on equities held in the available for sale financial assets portfolio. C1.6 Total Eligible Capital eligible capital This is the sum of the components listed in C1.1 to C1.5. C2 Deductions from capital C2.1 Investments in own shares represents any investment in the shares of the company, quantified as fixed assets in the balance sheet. C2.2 Intangible assets are the full balance sheet value of goodwill, capitalised development costs, brand names, trademarks and similar rights and licences. C2.3 Interim net losses refers to the cumulative amount covering the period from the firm’s accounting reference date to the end of the

FCA 2017/XX current quarter. All the current year’s losses should be reported. Unpublished losses from the previous accounting period should also be shown here. C2.3a Subordinated loan and redeemable preference share restriction This is the amount of any excess as computed under the restriction explained in paragraph (7) of the C1-2 CAPITAL RESOURCES
section above.
C2.4 Other deductions from capital: include  Excess of drawings over profits for partnerships or sole traders: firms should report the difference between the personal drawings of a partnership or sole trader and the profit in the period, where the drawings exceed the profit for the period. C2.5 Total Deductions deductions This is the sum of the components listed in C2.1 to C2.4. C3 CAPITAL RESOURCES CALCULATION C3.1 CAPITAL RESOURCES Capital resources This is total eligible capital less total deductions (C1.6 to C2.5). C3.2 Capital requirement This is the amount calculated in sections C4.6(e) or C5.5(c), whichever is applicable. C3.3 SURPLUS/(DEFICIT) OF RESOURCES Surplus/(Deficit) of resources This is the capital resources less the capital requirement (C3.1 to C3.2). C4 CAPITAL REQUIREMENTS Capital requirement for a lender, or an administrator with administered assets on its balance sheet C4.1 The capital requirement for lenders or administrators that have the regulated mortgage contracts that they administer on their balance sheet is asset-based, and the information required is detailed in C4.2 to C4.6. C4.2 Total assets: this is the total value of assets as shown at line A1.12 in section A of the MLAR.

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C4.2a Assets subject to the credit risk requirement This is the amount of assets subject to the credit risk requirement computation as shown at line 6A in section L of the MLAR. This is relevant for a mortgage lender; or mortgage administrator with its administered assets on balance sheet, that undertakes business connected to regulated mortgage contracts that has one or more exposures which satisfy the conditions set out in MIPRU 4.2A.4R. C4.3 Undrawn commitments Undrawn commitments means the total of those amounts which a borrower has the right to draw down from the firm but which have not yet been drawn down (see MIPRU 4.2.12R and MIPRU 4.2.13G). However, undrawn commitments should not be included in the calculation of capital requirements if they have an original maturity of up to one year or if they can be unconditionally cancelled at any time by the lender. Similarly, existing mortgage offers should not be included in the calculations of capital requirements if the offer has an original maturity of up to one year or can be unconditionally cancelled at any time by the lender. C4.4 Intangible assets: this is the amount shown at C2.2. C4.5 Total adjusted assets: this is the sum of C4.2 and C4.3, less C4.2a and C4.4. C4.6 CAPITAL REQUIREMENT This section sets out how to calculate the capital requirement for a lender, or an administrator with administered assets on its balance sheet (see MIPRU 4.2.12R, MIPRU 4.2.18R and MIPRU 4.2.23R):
(a) is the minimum requirement of £100,000; (b) is 1% of the amount shown as total adjusted assets at C4.5, i.e. the assets that are not subject to the credit risk requirement calculation; (c) is the credit risk requirement as shown at line 9E in section L of the MLAR; (d) is the total of (b) and (c); and (e) is the capital requirement which is the higher of the fixed amount at (a) and the sum shown at (d).

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C5 Capital requirements for an administrator not having administered assets on its balance sheet C5.1 This section sets out the income-based capital requirements applicable to administrators that do not have the assets that they administer on their balance sheet. The information requirements are detailed in C5.2 – 5.5. Firms should report the following amounts from both their most recent annual financial statement and their estimated accounts for the current reporting year. C5.2 Total income Firms should report the amount of total income in their most recent (or other) financial statements, and an estimate of income for the current reporting year. Total income should include both revenue and gains arising in the course of the ordinary activities of a firm. Revenue consists of commissions, fees, net interest income, dividends, royalties and rent. Only gains that are recorded in the profit and loss account should be included in income. What is relevant for the calculation of income is the amount of actual income generated rather than the gross cash streams of any one transaction (see MIPRU 4.3.7R). C5.3 Relevant adjustments The following exceptional items must be deducted from the firm’s total income:
(1) profit on the sale or termination of an operation; (2) profit arising from a fundamental reorganisation or restructuring having a material effect on the nature and focus of the firm’s operations; and (3) profits on the disposal of fixed assets, including investments held in long-term portfolio. C5.4 Total relevant income Is the sum of C5.2 minus C5.3. C5.5 CAPITAL REQUIREMENT This sets out how to calculate the capital requirement for a an administrator not having administered assets on its balance sheet (see MIPRU 4.2.19R):
(a) is the minimum requirement of £100,000;

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(b) is 10% of the amount shown as total relevant income at C5.4 above; and (c) is the capital requirement which is the higher of the minimum amount at (a) and the calculation shown at (b).
SECTION D1: LENDING – BUSINESS FLOWS AND RATES
D1-D4 For details of the terms ‘Residential lending to individuals’ (and regulated/unregulated), and ‘other secured loans’, see Introduction, paragraphs 4 (i) – (iv). D1 Loans: Advances/Repayments – Row & Column Analysis For the two categories of loan assets, details are requested under various transaction columns that explain the transition from the previous quarter’s balances to the current quarter’s balances. D1 Loans: Advances/Repayments – Transactions (columns) Advances made in quarter should include:
(a) instalments released in the quarter for instalment advances; (b) re-advances, i.e. where previous charge cancelled; (c) further advances; (d) in the case of loans that have a facility to draw down extra amounts over and above the sum originally advanced, the total of any further amounts drawn down in the quarter; (e) the deduction from advances made of advance cheques cancelled; but should exclude:
(f) the amount of any loan books acquired in the quarter (which should be reported in ‘other debits/credits etc’):
(g) retentions imposed, which should be included as they are released; (h) sundry debits, i.e. any items not approved and not included in commitments, e.g. insurance debits, fines, insurance guarantees, valuation fees, arrangement fees etc. (unless formally treated as part of loan, that is where such amounts are repaid over the period of the loan); (i) any movements on overdrafts. Repayment of principal should include:

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(a) repayment of principal including capital repayments, full or partial redemptions and the principal element of the normal monthly monthly payment; (b) mortgage receipts temporarily posted to investment accounts; (c) transfers from investment accounts to mortgage accounts; but should exclude:
(d) the amount of any loan book sold during the quarter (to be reported in ‘other debits/credit etc’); (e) sundry credits to accounts, such as insurance premiums, fines, fees, etc; (f) advance cheques cancelled; (g) investment receipts temporarily posted to mortgage accounts; (h) any movement in overdrafts. In determining the amount shown under repayment of principal, it is recognised that firms may need to estimate the amount of interest repaid where amounts repaid include both interest and principal, and/or where the amount of interest repayable is not the same as the amount charged (e.g. annual review or deferred interest schemes, or where a loan is not being fully serviced). Write-offs in quarter This is the amount written off mortgage balances in the quarter (and off provisions charged to the income and expenditure account) and is to be on a basis consistent with amounts shown in the firm's published accounts as 'written off' within the analysis of changes in loss provision usually appearing as Notes to the Accounts. The amount written off may arise for example from:

(a) sale of a property in possession where there is a shortfall; or
(b) a decision to write down the mortgage debt on a loan still on
the books. This may arise where the firm has taken the view that it is certain that a loss will arise and that it is prudent to write down the mortgage debt rather than carry the full debt and an offsetting provision. Examples might include certain fraud cases, or where arrangements have been reached with the borrower to reduce the mortgage debt repayable;
(c) the amount should be net of any write-backs in the quarter. If

FCA 2017/XX there are more write-backs than write-offs the net figure should be shown as a negative. Other debits/(credits) and transfers (net) include:
(a) interest charged to the loan account in the period; (b) interest repaid during the period; (c) amounts charged to loan accounts and amounts received from borrowers in respect of such items as insurance premiums, valuation fees, and fines etc .; (d) mortgage balances acquired following takeover / merger; (e) loan books acquired from other lenders in the quarter; (f) loan books sold to other lenders in the quarter; (g) loan books securitised during the quarter; (h) the transfer of any securitised assets back onto the balance sheet (e.g. following the closure of a securitised pool of loans); (i) Transfers (net) should include any reclassified loans (e.g. where there has been a change in the use of the land on which the loan is secured to/from residential; or change in status of loan from/to regulated/non-regulated etc); (j) All movements on overdrafts (that is, net change in overdraft balances), other than writeoffs write-offs. NB: Balances on loan books acquired/sold/securitised should be as at the date of the relevant event and not be subject to any revaluation factors. Overdraft analysis (final 3 columns of D1):
The term “overdraft” here and in other columns of D1, is used to cover two types of revolving credit facilities: overdrafts and credit cards. The balance at end of quarter in column 6 is further analysed into loan balances excluding overdrafts and, separately, balances on overdrafts. The final column in D1 represents the sum total, across all overdraft accounts included in the penultimate column, of the individual credit limits on each such overdraft. D2 Loans: Book movements The 'transactions in the quarter' columns are analyses of amounts already included within the 'other debits/(credits) and transfers

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(net)' column of section D1.
(a) 'loans acquired' represents balances on any relevant loan books acquired during the quarter from other lenders; (b) 'loans sold' represents balances on any relevant loan book (i.e. parcel of loans) sold during the quarter to another lender; (c) 'loans securitised' represents balances on any loans that the firm has securitised in the quarter. It includes balances on loans subject to securitisation transactions which should follow MIPRU 4.2.14R to MIPRU 4.2.16G. Securitised loans brought back onto the balance sheet in the quarter should also be included and the amount here should be net of them. If the amount of securitised loans brought back onto the balance sheet is greater than the securitised balance then the net figure should be reported as a negative; and (d) 'other' represents the net amount of other transaction amounts included in 'other debits/(credits) and transfers (net)' in D1. NB: As a result, D2 (item (a) – item (b) – item (c) + item (d)) should equal D1 (item ‘other debits/(credits) and transfers (net)). The final column 'balance at end quarter on loan assets subject to non-recourse funding' represents all such loan assets (and not just the amount treated as transactions in the quarter), and requires the 'gross amount' of such loan assets to be reported against relevant line item categories. Non-recourse funding can be established either by contract or in-substance. The 'gross amount' is the amount of any such loan that would be shown in a firm's published or other balance sheet as X in the example below:
gross loan asset = X less non-recourse funding = Y net loan asset = X-Y In the analysis here at D2, it is therefore the gross loan asset at the end of the reporting quarter that should be reported in the final column. Once securitised, it is recognised that end quarter gross balances will not necessarily remain constant (due either to borrower repayments, the possibility of any further advances, or other arrangement for 'topping up' a pool of securitised loans etc). D3 Loans: Interest rates Basis Interest rates in this table are nominal annual rates charged to the

FCA 2017/XX customer on loan accounts excluding overdrafts (as defined in D1). They should ignore the effect of any interest rate swaps or other hedging contracts that might exist, and also ignore the effect of any offsetting deposit account (as for example in the case of an offset mortgage). This provides an analysis of weighted average interest rates for the loan assets reported under ’Loans excluding overdrafts’ in column 7 of D1 above. 'Interest rates at end of quarter' (columns 4, 5, and 6 of section D3) means rates applying at least throughout the last day of the quarter, so firms should not use rates which only come into operation at the beginning of the next quarter. Points to note on specific columns are:
(1) Balances at end quarter
Accrued interest should be included (even though it is excluded when computing the weighted average rate). The first 'of which' analysis is designed to obtain information on balances subject to fixed rates of interest and balances subject to variable rates of interest. (The two amounts should add to the balance in column 1). For these purposes:
'fixed' means the rate of interest is fixed for a stated period. It should also include any products with a 'capped rate' (i.e. subject to a guaranteed maximum rate) and any products that are 'collared loans' (i.e. subject to a minimum and a maximum rate). Annual review or stabilised payment loans should be excluded (since the purpose is merely to smooth cash flow on variable rate loans); 'variable' includes all other interest rate bases (i.e. other than those defined above as 'fixed') applying to particular products, including those at, or at a discount or premium to, one of the firm's administered lending rates; those linked to Libor (or other market rate); those linked to an index (e.g. FTSE) etc. However if any such loan products are subject to a 'capped rate', then treat as 'fixed'. The second 'of which' analysis is designed to obtain information on loan balances according to whether the nominal annual interest rate charged to the customer at the quarter-end is higher than the prevailing Bank of England Base (or repo) Rate (BBR). For these purposes the BBR is that applying on the last day of the reporting quarter. The analysis is subdivided into four categories:
(a) loan balances where the rate charged is less than 2% above BBR. Include here also all loan balances where the rate charged is less than BBR (as a result

FCA 2017/XX the sum of these four columns will equal the figure in the TOTAL column); (b) loan balances where the rate charged is 2% or up to 3% above BBR; (c) loan balances where the rate charged is 3% or up to 4% above BBR; (d) loan balances where the rate charged is 4% or more above BBR. (2) Weighted average nominal annual rates (a) Interest rates reported in Table D3 provide a broad indication of market rates. They should ignore the effect of any interest rate swap or hedging. For each line item the weighted average rate should be derived as follows:
(i) identify the various nominal/quoted interest rates that apply to elements of this line item; then (ii) for each separate nominal/quoted rate, multiply that rate by the amount of end quarter balances (excluding accrued interest) for which that rate applies; and (iii) add up the results of (ii) for all the different rates for this line item; and (iv) divide the total calculated in (iii) by the corresponding end quarter balance in column 1, 2 or 3 less accrued interest (against the line item concerned). NB: in the 'of which' analysis that requires separate reporting of weighted 'fixed' and 'variable' rates, a cross check for each row is that the weighted average nominal rate on all balances is equal to the weighted average of the reported fixed and variable rates in the subsequent two columns. D3.1 – 3.8 Other Points The interest rate to be used is the rate charged to the loan account, which in certain circumstances will differ from the interest rate 'payable' by a borrower. These circumstances include deferred interest loans, interest roll-up loans, annual review schemes or where the loan is not performing.

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Advances in quarter refers to the same amount as covered under 'advances in quarter' in the Loans: Advances/Repayments analysis in Section D1 above. D4 Loans: Commitments (columns) Commitments made since end of previous quarter should include:
(a) the aggregate of formally agreed advances (whether or not the mortgage offer has been accepted by the prospective borrower), including amounts recommended for retention, all instalment elements, and further advances; but should exclude:
(b) commitments from previous quarters that have been cancelled in the current quarter; (c) retentions imposed and subsequently not released; (d) instalment commitments that have not been taken up; (e) advance cancellations that are not re-issued; (f) sundry debits, e.g. insurance debits, fines, insurance guarantees, valuation fees, arrangement fees etc (unless formally treated as part of the loan, that is where such amounts are repaid over the period of the loan). Cancellations in quarter Includes (b), (c), (d) and (e) above. Advances made in quarter This refers to the same amount as covered under ‘advances in quarter’ in section D1 above. Other debits/(credits) and transfers (net) This is unlikely to be needed on a routine basis. It is intended to cover less frequent events such as loan commitments acquired on merger with another firm or acquisition of a loan book; or transferred on sale of a package of loans; or where 'commitments outstanding' need adjusting for reasons not attributable to other columns.
SECTION E: RESIDENTIAL LOANS TO INDIVIDUALS - New business profile
E1-6 Gross advances in quarter

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Covers actual advances made in the quarter. For these purposes separate advances (e.g. stage payments) made in the period on the same mortgage should count as a single advance for the 'number' column in sections E3, E4, E5 and E6. NB: 'gross advances' should be compiled on the same basis as in
section D1 above and therefore relevant totals for each section in
E1 to E6 should also agree with the amount of gross advances reported in D1. E3-6 Balances outstanding Covers balances at end of the quarter. Relevant sub-totals should agree with corresponding balances shown under ‘Loans excluding overdrafts’ in column 7 of D1. E1/2 By Income Multiple and LTV (Loan to Valuation ratio) The amount to be included in the table is the gross advance, but its allocation to a specific cell is determined according to income multiple and LTV which are both defined using the size of the loan (as defined below). For second charge regulated mortgage contracts, the calculation of income multiples and LTVs are to also include the outstanding balance of the first charge regulated mortgage contract and any higher priority second charge regulated mortgage contracts. E1/2 By Income Multiple and LTV Income multiple based on single or joint incomes For this analysis, 'income' should be taken as gross annual income before tax or any other deductions. The loan should first of all be categorised to 'single' or 'joint' income basis, and the income multiple calculated as described below:
(i) Single income basis. This means only one person's income was taken into account when making the lending assessment/decision. The income multiple here is the total loan amount divided by the borrower's total income (total of the borrower's main income and any other reckonable income e.g. overtime etc, to the extent that the firm takes such additional income into account in whole or in part). (ii) Joint income basis. This means that two or more persons' incomes were used in the lending assessment/decision. The income multiple here is the total loan amount divided by

FCA 2017/XX the aggregate income of the two or more borrowers. (iii) Other. This category is to be used when the loan assessment is based, only partly or not at all, on one or more persons' incomes. Thus include here:
Under Single Income section (E1.6/E1.13)  Buy to let loans where the loan assessment is based on the rental yield of the property (but not buy to let loans based solely on one or more persons’ incomes which should be shown against the relevant income multiple category);  Lifetime mortgages since in most if not all instances, the concept of a supporting income is not applicable;  Other products (no current examples) Under Joint Income section (E2.6/E2.13)  Business loans, where typically the loan assessment will be based on mixed sources of business/personal income or perhaps just on the capacity of a person’s business to support the loan;  Other products that have similar characteristics, that is where the loan assessment is based on either mixed income sources or non-personal incomes. (iv) Not evidenced. This 'of which' analysis applies to loans made on the basis of one or more persons' incomes, and therefore should exclude any loans reported in "Other" (defined in (iii) above). It covers loans where: the lender has no independent documentary evidence to verify income (e.g. as provided by an employer's reference, a bank statement, a salary slip, a P60, or audited/certified accounts. For the purpose of income multiples, the multiple is of loan to income where loan is as defined below. Loan to valuation ratio LTV Should be based on the following:
(i) loan is defined for:
(a) new borrowers - as the amount of actual advance or, in the case of loans where the amount advanced in the period is less than the total amount of the loan to

FCA 2017/XX which the firm has agreed to lend (for example loans with additional drawing facilities or loans involving instalments/stage payments/retentions), is the amount of committed advance (including any committed drawing facilities); (b) existing borrowers - as the total amount of debt outstanding including the further advance plus any committed drawing facilities at the time of the further advance; and will include MIG ("mortgage indemnity guarantee"), building and other insurance premiums and other sundry items if these are included in the amount advanced; (ii) valuation is to be taken as the most recent valuation of the property which is subject to the mortgage (the existence of additional collateral on any other property should be ignored when calculating LTV). For these purposes, "recent valuation" can either be based on an actual valuation, or an estimated valuation using indexed valuation methodology applied to an original actual valuation. In the case of staged construction or self-build schemes, valuation means 'expected final value of the property' at the time the firm is committed to making the loan (i.e. takes the lending decision). E3 Credit history This seeks to categorise lending in terms of a borrower’s previous credit history, as measured at the point when the new advance is made. For these purposes, it is only necessary to establish a borrower’s credit history at a single point in time, i.e. at the time of making the loan. In practice this will usually be done at the ‘offer’ stage of making a loan. It is not intended that credit history should be reassessed after the loan has been made. However, if a further advance is made, then it will be necessary to re-assess. In particular the aim is to separately identify under the heading 'Impaired credit history', those loans where it appears that the borrower has some form of adverse credit history:
(i) at the point when the new advance is made and the loan is reported under 'Gross advances'; (ii) subsequently for reporting under 'Balances outstanding', the amount of the loan at the quarter end to such a borrower (who at the point when the present loan was advanced, was deemed to have had an adverse credit history). However, if there is subsequently a further advance on the loan (and which will be reported under ‘Gross advances’ in E3), this is

FCA 2017/XX an occasion to re-assess the borrower’s credit history. At that stage, the total amount of the loan (including further advance) should be classified under ‘Balances outstanding’ on the basis of the credit history as determined at the time of making the further advance. This means that the further advance and total loan amount will be reported on a consistent basis. E3.1 Impaired credit history If any of the following conditions are met at the time of making the loan, the borrower should be reported as having an impaired credit history:
(i) arrears on a previous (or current) mortgage or other secured loan within the last two years, where the cumulative amount overdue at any point reached three or more monthly payments; (ii) arrears on a previous (or current) unsecured loan within the last two years, where the cumulative amount overdue at any point reached three or more monthly payments; (iii) one or more county court judgements judgments (CCJs), with a total value greater than £500, within the last three years; (iv) being subject to an Individual voluntary arrangement (IVA) at any time within the last three years; (v) being subject to a bankruptcy order at any time within the last three years; but firms should not include technical arrears as part of the above definition. Technical arrears means circumstances where the borrower has been the victim of a banking error giving rise to late payment. NB: In (i) to (v), firms should ignore whether the borrower has subsequently paid off arrears, or has satisfied/discharged a CCJ or IVA or bankruptcy. In the case of loans involving two or more borrowers, the impaired credit test is whether any one of the borrowers individually meets any of the five listed impaired credit conditions. E4 Payment type This section analyses loans in terms of how the borrower is contractually expected to service the loan, and is split into four categories:
 repayment;

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 interest only;
 combined; and
 other.
E4.1 Repayment (capital and interest)
This is the traditional payment option available to borrowers. Such loans involve regular periodic payments covering interest for the period and some repayment of capital. E4.2 Interest only This is the type of loan which requires the borrower to make regular payments of interest only (i.e. without any obligation to make periodic payments of capital). It includes 'endowment' type loans, others having an independent ultimate repayment vehicle (e.g. PEP, ISA or pension mortgages), as well as other interest only loans where there is either no specific ultimate repayment vehicle in place or where the lender does not formally require one to be in place. E4.3 Combined This section is for loans where both of the above payment types are in place (i.e. part of the loan is ‘repayment’, and part is ‘interest only’). E4.4 Other This category will contain loans where no regular periodic payment obligation is in place, for example secured overdraft facilities or secured credit cards, and lifetime mortgages. E5 By drawing facility These are loans which include an option to draw down further amounts (i.e. where, at the outset of the loan, extra drawing rights exist over and above the original amount advanced, but not those arising only in relation to previous overpayments). The drawing facility category is also meant to indicate a facility that is only exercisable by the borrower (e.g. via a cheque book, on line transaction or on demand). It would therefore not apply to situations where a loan is merely subject to retentions or stage payments, since the borrower does not have a draw-down option that he they can exercise. E5.1 Extra drawing facility These are loans which in general are structured as follows:

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Example structure when flexible loan contract agreed Amount of loan advanced £65,000 Amount of extra drawing facility agreed to (but not advanced at outset of loan) £15,000 Total loan facility up to £80.000 E5.1 (a) Loans including unused facility This means the total loan facility i.e. the sum of the amount of loan advanced and the amount of extra drawing facility agreed (but not advanced at the outset of the loan):
(i) gross advances in quarter should detail those loans that include an extra drawing facility: show the number and amount of such loans; (ii) loans outstanding means the end quarter balances (on original advance plus any subsequent draw downs) plus the residual amount of any unused drawing facility that remains available to the borrower: show the number and amount of such loans. (b) Unused facility This is the amount of the extra drawing facility that has not been drawn down by the borrower:
(i) gross advances in quarter should detail the unused facility element of such loans: show the amount; (ii) loans outstanding means the end quarter balances of any unused extra drawing facility that remains available to the borrower: show the amount. (c) Net loans This can be calculated by subtracting the entry in row b) from the entry in row a). E5.2 Loans with no extra drawing facility Firms should report all other loans here. E5.3 TOTAL This figure should be calculated as follows:

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(i) for 'Number' by adding E5.1(a) and E5.2, and (ii) for 'Amount' by adding E5.1(c) and E5.2. E6 By Purpose purpose This analysis is to identify the principal purpose of the loan, which should therefore only be classified to one category of E6.1 to E6.7. A stage advance should be classified for the same purpose as the main advance. E6.1/2 House purchase Loans where the borrower is purchasing a house (or flat etc). Firms should include stage payments on such transactions here and not in 'further advances'. A distinction is drawn between loans for house purchase where the purpose is for owner occupation, or for buying with a view to letting ('buy to let'). Loans for owner occupation are required to be sub divided into those to first time buyers (FTBs, that is where the tenure of the main borrower immediately before this advance was not owneroccupier) and those to other buyers. E6.2 Buy to let (BTL) Such loans typically involve the borrower purchasing a residential property with the intention of letting it out on a rental basis. The majority of BTL loans will be those used by the borrower to acquire a property with the intention of letting it on a commercial basis to unrelated third parties. That is to persons, who in relation to the borrower, are not ‘related persons’ (where ‘related persons’ are those set out in subsections (A), (B) and (C) of section 4 (iv) of the Introduction). These BTL loans are not regulated mortgage contracts regulated under MCOB and hence should be shown in columns 5 to 8 of E6.2 under ‘Non regulated loans’. However, where a BTL loan is used by the borrower to acquire a residential property that will be occupied by a related person, such a loan will normally be a regulated mortgage contract (providing it satisfies the other requirements of a regulated mortgage contract) regulated under MCOB and should therefore be shown in columns 1 to 4 of E6.2 under ‘Regulated loans’. An example of such a loan is where a parent buys a house or flat for use by a student son or daughter, with a plan to take in other students on a rental basis. Further advances and remortgages on any BTL loans should be included within E6.2 . E6.3 Further advance A further loan (either as a normal further advance, or as a second

FCA 2017/XX charge loan where the firm has the first charge) to an existing borrower of the firm, secured on the same property. The underlying purpose of the further advance is not relevant and could include e.g. purchasing freehold interest in a currently owned leasehold property; buying a second property on the security of the first; as a consumer loan fully secured on residential property; or as a ‘drawdown’ on a flexible mortgage. However, further advances on existing buy to let loans, and on lifetime mortgage loans should instead be reported against E6.2 and E6.6 respectively. E6.4/5 Re-mortgage Loans where the borrower is not moving house but is refinancing an existing loan, either one already with the firm or one from another lender. The whole amount of the new advance should be classified as 're-mortgage' even if it is larger than the existing loan. Re-mortgages from another lender are well understood, and need no further comment. But a ‘re-mortgage’ by one of a firm’s existing borrowers (i.e. ‘own borrower’ in E6.4) will not always be transacted in exactly the same way by different lenders. The following comments are designed to provide some illustrative examples, and indicate how the actual transaction between lender and borrower should be reported:
 Example 1: borrower changes from variable rate to fixed rate, with loan amount unchanged, at say £100k. Some lenders' systems formally treat this as a redemption and a new loan advance which is reportable under "advances" in D1 (in which case report as "re-mortgage" under this analysis of advances in E6), but other lenders treat it as an interest variation and not as a new advance (so not included in advances in D1 or E) .  Example 2: borrower changes from variable rate to fixed rate and takes out additional loan at the same time, say extra £25k on top of existing £100k. Some lenders will treat as a redemption of £100k and a new advance of £125k (in which case the £125k is a re-mortgage), but others may treat as two loans (with first loan regarded as just subject to an interest rate variation, and the extra loan as a "further advance") .  It is recognised that practices vary among lenders when it comes to further advances or re-mortgages. What is important is that the actual transaction between the lender and the borrower is reflected in the MLAR.

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 Thus if a firm genuinely treats the advance of new money as a further advance (perhaps setting up a second sub account), then that should be reported as such (e.g. at E6.3) .  However if the old loan is formally replaced with a new loan (at the same or increased size) and this is reported in "advances" in D1, then the new loan should similarly be reported in E, and in E6.4 shown as "re-mortgage". NB: However, re-mortgages on existing buy to let loans, and on lifetime mortgage loans, should instead be reported against E6.2 and E6.6 respectively. E6.6 Lifetime mortgages (i) Regulated loans: Lifetime mortgages (columns 1 to 4) This is a specific type of regulated mortgage contract, which is defined in the Handbook as follows:
A regulated mortgage contract under which:
(1) an MCD exempt lifetime mortgage; or (2) (other than in (1)), a regulated mortgage contract or an article 3(1)(b) credit agreement under which:
(a) entry into the mortgage is restricted to older customers above a specified age; and (b) the mortgage lender does not generally specify a period at the end of which the amount borrowed (plus interest, if any, outstanding) must be repaid, and while the customer continues to occupy the mortgaged land as his main residence:
the lender may or may not specify a mortgage term, but will not seek full repayment of the loan (including interest, if any, outstanding) until the occurrence of one or more of the specified life events; and (i) no instalment repayments of the capital and no payment of interest on the capital (other than interest charged when all or
part of the capital is repaid voluntarily
by the customer), are due or capable of becoming due; or (ii) although interest payments may become due, no full or partial repayment of the

FCA 2017/XX capital is due or capable of becoming due; or (c) the loan made to the customer is repayable in one or more of the following circumstances:
while the customer continues to occupy the mortgaged land as their main residence:
(i) the death of the customer; or no instalment repayments of the capital and no payment of interest on the capital (other than interest charged when all or
part of the capital is repaid voluntarily
by the customer), are due or capable of becoming due; or (ii) the customer enters into long term care; or although interest payments may become due, no full or partial repayment of the capital is due or capable of becoming due; or (iii) the customer moves into sheltered accommodation or residential care; or although interest payments and partial repayment of the capital may become due, no full repayment of the capital is due or capable of becoming due. (iv) the customer acquires another dwelling for use as his main residence; or (v) the customer chooses to repay all or part of the loan; or (vi) The mortgage lender exercises its legal right to take possession of the mortgaged land under the terms of the contract. (ii) Non- regulated loans: ‘Lifetime mortgage’ (columns 5 to 8) Loans to be included under these columns include:
 loans having broadly similar characteristics to those set out in (i)(a), (b) and (c) above, but which were advanced before 31 October 2004. Such loans will usually have been known as ‘equity release loans’.

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 loans made after 31 October 2004, which whilst not satisfying the full criteria needed to be classed as a regulated mortgage contract (e.g. since a second but not a first charge is taken), nonetheless match the characteristics set out in (i)(a), (b) and (c) above. (iii) Further advances and re-mortgages on any of the loans described in (i) and (ii) above, should be included within E6.6 E6.7 Other Would include for example where a borrower is not moving house but takes a loan on the security of his previously unmortgaged property.
SECTION F: LENDING - ARREARS ANALYSIS
Introduction
The guidance notes in this section serve two purposes: they provide guidance for (i) items F1 to F5 shown in MLAR table F. For these sections, the analysis of lending refers to on-balance sheet loan assets only, but excluding overdrafts (ie as included under ‘Loans excluding overdrafts’ in column 7 of section D1 of table D). The responsibility for completing table F lies with the authorised lender, irrespective of whether the lender administers the loans itself or out-sources the administration elsewhere. The information should therefore appear as part of the lender’s MLAR. (ii) items H1 to H5 shown in MLAR table H. For these sections, which cover reporting of arrears by firms with a mortgage administrator's activity, the analysis should include arrears in respect of the types of residential loans to individuals set out in the guidance notes for table G, but only where the firm is acting as 'principal administrator'. For guidance on items H1 to H5 see corresponding guidance against items F1 to F5. Similarly references in the guidance notes to any items F1 to F5, should also be read as referring to items H1 to H5 when completing table H. F1 – F4 Arrears categorisation by type of loan For these sections, the analysis of lending is divided into two main types:
(i) residential loans to individuals (split between regulated and

FCA 2017/XX non-regulated business);
(ii) all other secured loans.
The analysis is based on expressing the amount of arrears on each loan as a percentage of the customer’s balance outstanding on the loan, allocating cases to relevant arrears bands, providing details of cases moving up into more serious arrears bands in the quarter, and giving information on loan performance during the quarter. (In cases where there is more than one loan secured on a single property, these should be amalgamated, where possible, in reporting details of arrears cases.) Definitions of terms used above, and those related to them, are given below in sections having side headings numbered 1, 2, 3, 4, 5 and 6. F1.6/ F2.6 & F3.6/ F4.6 In possession: cases should be included here where the property is aken taken in possession (through any method e.g. voluntary surrender, court order etc). For development loans in particular, cases should also be included where the appointment of a receiver and/or a manager has been made, or where the security is being enforced in other ways (which may or may not also involve the existence of arrears e.g. building finance case with interest roll up, no arrears, but a current valuation is less than the outstanding debt).

Balance outstanding (columns 3 and 6)
1.1 This is the amount of total debt at the reporting date, and
should comprise the total amount outstanding (after deducting any write-offs but without deduction for any provisions) in respect of:
(i) the principal of the advance (including any further advances made); (ii) interest accrued on the advance (but only up to the reporting date), including any interest suspended; (iii) any other sum which the borrower is obliged to pay the firm and which is due from the borrower, e.g. fees, fines, administration charges, default interest and insurance premiums; and is intended to be consistent with the basis used for presentation of gross balances outstanding shown in the balance sheet section of the return (i.e. at A3 Column 1 for on-balance sheet or unsecuritised balances, and at A3 column 4 for securitised balances), with the addition for tables F and H of any interest suspended not included in the balance sheet.

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2. Amount of arrears (columns 2 and 4)
2.1 Arrears will arise through the borrower failing to service
any element of his debt obligation to the firm, including capital, interest, or fees, fines, administrative charges, default interest or insurance premiums.
2.2 At the reporting date, the amount of arrears is the
difference between:
(i) the accumulated total amounts of (monthly or other periodic) payments due to be received from the borrower; and (ii) the accumulated total amount of payments actually made by the borrower.
2.3 Only amounts which are contractually due at the reporting
date should be included in 2.2(i) above. That is:
(i) include accrued interest only up to the reporting date but not beyond; (ii) and, only include a proportion of any annual insurance premium if the firm permits such amounts to be paid in periodic instalments. However if the terms of the loan or the lender’s practice are such as to permit insurance premiums to be added to the loan principal then do not treat such amounts as contractually due; (iii) similarly, where 'any other sum' has been added to the loan (see 1.1 (iii) above), only include such proportions as are contractually due (e.g. if it is the practice in particular circumstances to add the sum/charge to the loan and require repayment over the residual term of the loan); (iv) in assessing 'payments due' when a borrower has a flexible loan, it is important to apply the contractual terms of the loan: for example, payment holidays which satisfy the terms of the loan should not be treated as giving rise to an arrears position; (v) do not however include 'Deeds Store' loans in the arrears figures (that is, loans where the debt is de minimis e.g. £100, but the borrower still has insurance premiums to pay and perhaps some instalments are overdue).
2.4 In the case of annual review schemes the 'payment due to

FCA 2017/XX be received' under 2.2(i) is that calculated under the scheme. This may well differ from the amount charged to the account but should not of itself give rise to any arrears, providing the borrower is making the level of payments advised by the firm. The same principles apply to deferred interest products - if the borrower is making the payments that are required under the loan arrangements then he is not in arrears, even though the debt outstanding is increasing.
2.5 Where a firm makes a temporary 'concession' to a
borrower (i.e., an agreement with the borrower whereby monthly payments are either suspended or less than they would be on a fully commercial basis) for a period, the amounts included in 2.2(i) are those contractually due (and at commercial rates of interest). Hence the borrower will continue to be in arrears and the level of arrears will in fact continue to increase until such time as he is able fully to service the debt outstanding.
2.6 Where the terms of the loan do not require payment of
interest (or capital) until a stated date or until redemption or until certain conditions are triggered, as for example in the case of certain building finance loans, then the loan is not in arrears until such time as contractual repayments are overdue. There may be circumstances however where, even though the loan is not in arrears, it falls to be reported under F1.6, F2.6, F3.6 or F4.6. (See notes on F1.6/F2.6/F3.6/F4.6 at beginning of Section F.)
2.7 The reporting treatment of cases where arrears have been
capitalised is dealt with in section 3 below.
2.8 Where a 'capitalisation' case that has at one time been
correctly removed as fully performing (see section 3) but at some later time defaults, then this should be treated as a new default and the amount of arrears taken as that arising from this new default. That is, the previously capitalised arrears should not be reinstated as current arrears.
3. Capitalisation of arrears and reporting criteria
3.1 By 'capitalisation' we mean a formal arrangement agreed
with the borrower to add all or part of a borrower's arrears to the amount of outstanding principal (i.e. advance of principal including further advances less capital repayments received during the period of the loan) and then treating that amount of overall debt as the enlarged principal. This enlarged principal is then used as the basis for calculating future monthly payments over the remaining term of the loan. Where less than the full amount of arrears is capitalised (or indeed where none of the arrears is

FCA 2017/XX capitalised) then, providing there are arrangements made for the borrower to repay the non-capitalised arrears over a shorter period ranging for example from 3 to 18 months, this type of arrangement should also be regarded as an equivalent of 'capitalisation'.
3.2 The decision to 'capitalise' (or treat as if capitalised) is a
business decision between the firm and the borrower.
However for the purposes of consistency in reporting arrears cases in table F (and reporting capitalisations in
section F5) the following reporting criteria should be used
where a firm has capitalised the loan (or treated as if capitalised) and reset the monthly payment:
(i) such an arrears case should continue to be included in sections F1 – F4 as an arrears case until the loan has been 'fully performing' (see (ii) below) for a period of six consecutive months (any temporary increase in arrears during this qualifying period has the effect of requiring six consecutive months of fully performing after such an event). Until that time it should be included in table F, and be allocated to the arrears band applicable at each reporting date as if 'capitalisation' had not taken place; (ii) for these purposes a loan is considered to be 'fully performing' only where the borrower has been meeting all obligations on the loan with regard to repayments of principal, interest (at a normal mortgage rate on the full balance outstanding, including as appropriate any relevant past arrears), any payment towards clearing past arrears as agreed with the firm and any default payments due levied in respect of previous missed repayments. That is, amounts may be either added to the principal of the loan or otherwise repaid over a shorter period than the residual term of the mortgage, as agreed between firm and borrower. But then this revised payment
schedule must be fully maintained for a six month
period before the arrears can qualify to be treated as capitalised for reporting purposes and hence removed from the arrears cases in table F; (iii) arrears cases qualifying as 'fully performing' under (ii) should then be omitted from sections F1-F4, and should then be reported in section F5 for the same reporting period during which the removal occurs.
4. Cases entering higher (i.e. more serious) arrears band in

FCA 2017/XX quarter (columns 1 to 3)
This refers to those cases now included in a particular arrears banding which may have been classified in a less severe (i.e. lower numerical) band at the end of the previous quarter, but which have deteriorated sufficiently during the quarter to move to a more severe arrears band. This would mean, for example, that cases that were previously excluded from the arrears table being less than 1.5% in arrears would now be entered in the '1.5 < 2.5%' arrears band (i.e. 1.5% or less than 2.5%) in F1.1, and F1.6 (and F2.6/F3.6/F4.6) will show details of those cases taken into possession during the quarter which were previously classified as in arrears under any of F1.1-1.5 (or F 2.1- 2.5/3.1-3.5/4.1-4.5, as the case may be). Cases which have improved during the quarter and which could now be classified in a less severe arrears band should not be included in these 3 columns.
5. Number (of cases) (Columns 1 and 4)
5.1 In cases where there is more than one loan secured on a
single property, these should be amalgamated, where possible, in reporting details of arrears cases.
5.2 In cases involving, for example, arrears on loans to property
developers (which would come under F4), the loan should count as a single case in the number column irrespective of the number of properties on the development itself.
6. Performance of current arrears cases (column 7)
6.1 This analyses all those arrears cases included in columns 4
to 6 and gives a measure of performance covering all of the loans in a particular arrears band at the end of the quarter. The measure, which compares 'actual' with 'expected' payments, is required to be calculated for a single time period: the 3 months covered by the firm's latest financial quarter. For this time period, the performance measure should be calculated as a percentage as follows:
total of 'payments received' from borrowers x 100 total of 'payments due' from borrowers where:
(i) 'payments due' means amounts due under normal commercial terms (and not the lesser amounts which may have been agreed as part of any temporary arrangement) fully to service the loans: that is the balances outstanding including those elements referred to in 1.1 above such as insurance, fees and

FCA 2017/XX fines etc. (If for some reason this is not readily available then a suitable approximation can be derived for each relevant quarter by applying one quarter of the annual interest rate to the appropriate balance outstanding, and adding in other payments due for example insurance, fees and fines etc); and (ii) 'payments received' should be limited to regular repayment of interest, capital and other sundry charges to the loan account, and should exclude abnormal repayments (e.g. sale proceeds of property in possession, and large lump sum repayment of part or all of the outstanding balance). The reasoning behind this is that excess payments on one or more arrears cases would otherwise have the effect of compensating for underpayment on other arrears cases and, as a result, give an overstated performance measure. Therefore, in compiling aggregate payment received figures (as part of the payment performance ratio) the contribution from an individual loan in arrears should be limited to no more than the 'payment due' amount.
6.2 The amount to be entered on the return is a percentage to 2
decimal places. Given the limitation described in 6.1 (ii), it cannot exceed 100%.
6.3 In calculating the performance measure on possession cases
(F1.6, F2.6, F3.6 and F4.6), the following points are relevant:
(i) 'payments received': in many cases these may be nil, but not always since the property in possession may be let out and a rental income received. In each case the payment received should be included for the purposes of calculating the performance measure; (ii) 'payments due': in recognition of the fact that amounts of interest will still be charged to the borrower’s account, then the 'payments due' should be calculated as three months’ interest at normal commercial rates of interest; (iii) however, in F1.6, F2.6, F3.6 and F4.6, it is likely that the performance measure will in most instances be zero; (iv) the relevance of the above however, is that 'payments due' on possession cases need to be computed in order to feed into the overall performance measure at F1.6, F2.6, F3.6 and F4.6.

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6.4 The overall measure of performance at F1.7 (and similarly
at F2.7, F3.7 and F4.7) includes possessions, and is the ratio of:
(i) ‘payments received’ on all cases in F1.1 to F1.6 (ii) ‘payments due’ on all cases in F1.1 to F1.6 The same approach should be used for F2.7, F3.7 and F4.7. F5 Arrears management Number of sales/Number of (arrears) cases In cases where there is more than one loan secured on a single property, these should be amalgamated where possible in reporting details of possession cases sold during the period in F5 (column 1), and details of arrears cases in F5 (columns 3 & 4). Balance outstanding In F5 (columns 2 and 5) this is as defined in section F/1 paragraph
1.1 (including in the case of properties sold the costs of sale where
these have been debited to the borrower's account), and should be the balance at the end of the quarter. Possession sales during quarter Firms should include in F5 (columns 1 and 2) all properties sold in the quarter irrespective of whether losses have occurred. Capitalisation of arrears cases in quarter Details should be given in respect of those cases which, having previously been in the reported figures in table F on arrears, have now been capitalised (or treated as if capitalised), have satisfied certain performance criteria for six months, and have been removed during the latest quarter from the arrears figures which now appear in sections F1 – F4. Sees paragraph 3 of section F of the guidance notes. Cases involving temporary concession or arrangement In respect of the number of cases in arrears at the end of the quarter (i.e. reported in F1 to F4.7), details should be given of those cases for which the lender has taken steps to assist the borrower in some way. Specifically, firms should state in how many cases a temporary concession has been made (see paragraph 2.5 in Section F), and in how many cases a formal arrangement to capitalise has been made (see paragraph 3.1 in section F, which also includes within the term

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'arrangement' the example of a borrower making increased monthly payments to reduce some or all existing arrears). The balancing number should be shown in the next column 'No concession/arrangement'.
SECTION G: MORTGAGE ADMINISTRATION – BUSINESS PROFILE
Introduction
Article 61 of the Regulated Activities Order establishes administering a
regulated mortgage contract as a regulated activity. This applies equally to those firms that are lenders, and those whose principal business is to undertake mortgage administration on behalf of third parties. For firms that are authorised as mortgage administrators only, the information sought in this section will enable the appropriate regulator to establish the extent and nature of the firm’s mortgage administration business. The appropriate regulator will be able to assess the potential risks posed by the firm’s business activities and tailor its regulatory response accordingly. A mortgage administrator is a firm with permission (or which ought to have permission) for administering a regulated mortgage contract and where, as defined in article 61(3)(b) of the Regulated Activities Order, administering a regulated mortgage contract consists of either or both of:
 notifying the borrower of changes in interest rates or payments due under the contract, or of other matters of which the contract requires him them to be notified; and  taking any necessary steps for the purposes of collecting or recovering payments due under the contract from the borrower; But does not consist merely of having or exercising a right to take action to enforce the regulated mortgage contract, or to require that action is or is not taken a person is not to be treated as administering a regulated mortgage contract merely because they have or exercise, a right to take action for the purposes of enforcing the contract (or to require that such action is or not taken). You should note that this section applies to firms with just a mortgage administrator’s activity and those with both a mortgage lender’s and mortgage administrator’s activity. You should also note, however, that if you have both a mortgage lender’s activity and a mortgage administrator’s activity to administer your own book and do not have any off-balance sheet loans to administer, then you should not complete this section of the MLAR. ‘Principal’ and ‘Other’ Administrators Because of the extent of specialisation and separation of activities in the provision of mortgage lending and administration services, we need to

FCA 2017/XX identify whether a firm that is authorised as a mortgage administrator is acting for MLAR purposes as a ‘principal administrator’ or as an ‘other administrator':
 Principal administrator: this is where your firm is authorised to undertake a mortgage administrator’s activity, and is exercising that activity on behalf of either a lender or other firm that is not itself authorised to undertake a mortgage administrator’s activity;  Other administrator: this is where your firm (although authorised to undertake a mortgage administrator’s activity) is undertaking loan administration for either a lender or other firm which itself is also authorised to undertake a mortgage administrator’s activity. In this situation, your firm is not regarded as the ‘principal administrator’, and you are merely acting on behalf of an authorised mortgage administrator. G1 Mortgage contracts administered at end quarter Where your firm is acting as Principal administrator (columns 1- 3) Collects data on mortgage contracts administered as at the end of the quarter, but only where you are formally acting as principal in exercising a mortgage administrator's activity. It therefore excludes the reporting of:
 any loan administration where you, being a firm without a mortgage administrator's activity, are merely providing an outsourced service for a third party which does have a mortgage administrator's activity and which is exercising it in respect of those loans; and  any loan administration where you, a firm having a mortgage administrator's activity, are acting as agent and providing an outsourced service for a third party which itself has a mortgage administrator's activity and which is exercising it in respect of those loans. If you also have a mortgage lender's activity, then you should treat your own on and off-balance sheet loans as follows:
(i) your firm's on-balance sheet loans should be excluded from G1.1 a) and G1.2 a). These items will therefore only include loans administered for third party lenders who do not themselves have a mortgage administrator's activity; (ii) your firm's off-balance sheet loans should be included in G1.1 c) and G1.2 c). These will be the loans you have shown in
section A3 "Securitised balances" under "gross balances".
(These items G1.1 c) and G1.2 c) will also include loans you

FCA 2017/XX administer for other special purpose vehicles where you are formally exercising your mortgage administrator's activity). Where your firm is acting as Other administrator (columns 4-6) Record under these columns all of the mortgage contracts administered at the end of the quarter where you are not acting as a principal administrator. G1.1 Number of loans You should detail the number of regulated mortgage contracts administered as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for special purpose vehicles (‘SPVs’) (i.e. firms that fall within the Handbook definition of a special purpose vehicle). You should also detail the number of non-regulated loans administered as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for SPVs SPVs. The total (all loans) is the sum of regulated mortgage contracts and non-regulated loans. G1.2 Balance outstanding on loans You should detail the balances outstanding on all regulated mortgage contracts that you administer as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for SPVs SPVs. You should detail the balances outstanding on all non-regulated loans that you administer as at the end of the quarter for firms with a mortgage lender’s activity, for other firms (i.e. lenders for which you administer mortgages but they themselves do not have a mortgage lender’s activity) and for SPVs SPVs. The total (all loans) is the sum of regulated mortgage contracts and non-regulated loans. G2 Lenders for whom mortgage administration was being carried out at quarter end Collects data only on the top five lenders for each category by value (i.e. the largest five firms by value, based on balances outstanding on regulated loans) for whom mortgage administration was being carried out at the quarter end. (Details on other lenders are not required to be shown, over and above the top five listed in each category.) The analysis required in G2 covers all mortgage administration

FCA 2017/XX activity undertaken by your firm, irrespective of whether your firm is acting as a ‘principal’ or ‘other’ administrator. The final column of the analysis, however, asks you to indicate your status for each firm listed, namely whether acting as ‘Principal’ or as ‘Other’ administrator. G2.1 Firms with a mortgage lender’s activity Please detail the top five firms (by value) for whom mortgage administration was being carried out at the quarter end. You should include the firm's reference number in addition to the name of the firm. You should indicate the value of regulated mortgage contracts and non-regulated loans for each of the top five firms for whom you administer such contracts. The total (all loans) for each firm listed is the sum of regulated mortgage contracts and non-regulated loans. G2.2 Other firms Please detail the top five other firms (by value) for whom mortgage administration was being carried out at the quarter end (but who themselves do not have a mortgage lender’s activity). You should indicate the value of regulated mortgage contracts and non-regulated loans for each of the top five other firms for whom you administer. The total (all loans) for each firm listed is the sum of regulated mortgage contracts and non-regulated loans. G2.3 SPVs Please detail the top five SPVs SPVs (by value) for whom mortgage administration was being carried out at the quarter end. If your firm has off-balance sheet loans (which it has reported in G1.1 c) and G1.2 c)) then please show your firm as one of these five SPVs SPVs as follows:
 group together all SPVs SPVs for which your firm is the originator and show the aggregated amounts on a single line (irrespective of whether the total of regulated loans for all such SPVs SPVs would rank within the top five);  under "firm reference" column, put your firm's reference number;  under "Name of firm" column, put your firm's name followed by "own SPVs" in brackets, for example XYZ firm name (own SPVs).

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You should indicate the value of regulated mortgage contracts and non-regulated loans for each of the top five SPVs SPVs for whom you administer. The total (all loans) for each SPV SPVs listed is the sum of regulated mortgage contracts and non-regulated loans.
SECTION H: MORTGAGE ADMINISTRATION – Arrears analysis
Type of loans to be reported
This arrears analysis should cover only those types of loan listed below, in respect of which your firm is formally acting as principal in exercising a mortgage administrator's activity. Thus, irrespective of whether your firm has a mortgage administrator's activity, if you are merely acting as an administrator for a third party that itself has, and is exercising, a mortgage administrator's activity, then you should not include any such loans in this analysis. The types of loans to be included in the analysis are:
(i) Loans administered for firms which do not themselves have a mortgage lender's activity. These are the loans reported at G1.2 b) in
table G.
(ii) Loans administered for third party SPVs SPVs.
(iii) where your firm has a mortgage lender's activity, loans that represent your firm's off-balance sheet loans and which you have reported in
section A3 of table A as "gross balances" under "Securitised
balances".
NB: loans in (ii) and (iii) are all those shown in G1.2c of table G. The information presented in table H should represent the total of all such loan types listed above, in a single version of the table. H1 – H5 Guidance on arrears items The guidance for these items is provided in section F of these guidance notes, where items H1 to H5 correspond to items F1 to F5. The arrears analysis is of loan balances excluding overdrafts, as is the case in section F.
SECTION J: FEE TARIFF MEASURES
J1 Introduction
The purpose of this section is to enable the firm to provide data on the current fee tariff measures that apply to each of the regulated activities of home finance providing activity and administering a home

FCA 2017/XX finance transaction.
This section also distinguishes between the fee tariff measures that apply to the appropriate regulator (Financial Services Authority) FCA and FOS Ltd (Financial Ombudsman Service Limited). Since the relevant fee tariff measures may change from time to time, these guidance notes merely define where the current definitions of fee tariff measures are to be found. Accordingly, the following is a reference please refer to the relevant part of the appropriate regulator's website FCA’s Handbook where such details can be found:

Refer to FEES 4 Annex 1R 1AR and Annex 2AR of the Handbook
for the appropriate regulator FCA fee tariff*
Refer to FEES 5 Annex 1R, Annex 2R and Annex 3R of the
Handbook for the FOS Ltd fee tariff*
To the extent that the FOS Ltd fee tariff measure requires other relevant activities that the firm carries out to be taken into account, these should be included in J1.3. In relation to section J of the MLAR, firms must report the information required by this section solely in their year end MLAR. Firms with an accounting reference date of between 31 December and 31 March (inclusive) must report the information required by this section as at 31 December of the calendar year immediately before the relevant fee period. All other firms must report the information required by this
section as at 31 December of the previous calendar year. For example,
for 2006/07 fees, for firms with an accounting reference date of between 31 December 2005 and 31 March 2006 (inclusive) the information required by section J is that calculated as at 31 December

For all other firms the information required by section J is that
calculated as at 31 December 2004.
SECTION K: SALE AND RENT BACK BUSINESS (SRB)
Introduction
This section must be completed as follows:
 SRB agreement providers must complete K1 to K4;  SRB administrators must complete K5;  Firms that are both SRB agreement providers and SRB administrators must complete K1 to K5. K SRB: Residential sales by individuals It is expected that firms will have the following to report:
 regulated SRB agreements: in respect of transactions entered into since SRB became a regulated activity, and

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 non-regulated SRB agreements: in respect of transactions of a similar nature entered into before SRB became a regulated activity which are still being administered; and also any new contract that, while not meeting the precise conditions for a regulated contract, nonetheless has similar characteristics (for example cases where the purchaser is not regulated or where the firm has purchased a property under value and rents an alternative property to the seller). This approach means that all new and existing sale and rent back agreements – whether regulated or not, and whether transacted before or after SRB became a regulated activity – must be included in the information reported by the firm in section K. K1 Overall business summary This section looks at the firm’s SRB position at the start of the reporting quarter, at the various movements in the quarter, and at the end quarter position. Details required are:
K1.1 SRB agreements at start of quarter: those agreements that existed at the end of the previous quarter. This line should normally agree with figures reported as at the previous quarter end. K1.2 New sales in quarter: new SRB agreements transacted in the quarter, where the firm has obtained title to the property and monies have been paid to the SRB seller. ‘Amount’ is the sale value (paid to seller) and should be reported gross, that is, before the deduction of any fees and charges. K1.3 Disposals in quarter: SRB agreements where the firm has sold the actual property. ‘Amount’ is the SRB value of the contract as used for the same contract reported in K1.1. Transfers or sales of SRB agreements should be reported under ‘Business transfers-sales’ below. K1.4 Business transfer-acquisitions: where the firm acquires one or more existing SRB agreements from another party or parties. K1.5 Business transfer- sales: where the firm sells one or more existing SRB agreements to another party or parties. Include also transfers of such agreements to any party. K1.6 Other: include any other amounts which affect the balances reported in K1.1 and K1.7, that is which reflect any change in the book value of any SRB agreements during the quarter. This is to capture any ‘amounts’ that will affect the overall position but is not covered by K1.2-K1.5. A value is required to be recorded in the ‘Amount’ column only. K1.7 SRB agreements at end of quarter: the number and book value of SRB contracts in existence at the end of the quarter.

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K1.8 SRB agreements arranged for unauthorised persons: The number of SRB agreements arranged where an unauthorised person has obtained title to the property and monies have been paid to the SRB seller. The ‘Amount’ is the sale value (paid to seller) and should be reported gross, that is, before the deduction of any fees and charges. NB: it is expected that figures in K1.7 will reconcile with those in other rows as follows:
 For ‘Numbers’: K1.7 = K1.1 + K1.2 – K1.3 + K1.4 – K1.5  For ‘Amounts’: K1.7 = K1.1 + K1.2 – K1.3 + K1.4 – K1.5 + K1.6 K2 New business in the quarter This section looks at various aspects of new business that has been transacted in the quarter: each is described below. For each aspect:
 The ‘sale value’ means the gross amount paid to the seller before any fees and charges have been deducted.  The ‘All sales’ line should agree with figures reported in K1.2. K2.1 to K2.3 Sales: analysed by discount on open market value (OMV) Here SRB transactions are classified into different bands, according to the amount of discount expressed as a percentage of the open market value of the property that is subject to the SRB contract. Discount is the open market value minus the sales value. Values are required to be recorded in both the ‘Number’ and ‘Amount’ columns. So for example, for those SRB agreements where the discount is 30% to under 40%, enter the total number of such sales and the total sales values of those agreements in the relevant boxes on the K2.2 line. K2.4 Average of all sales The average discount is recorded as an amount. This value should therefore be recorded in the ‘Amount’ column only. For example, if 4 properties with an open market value of £100,000 were bought at a 25% discount and 4 properties with an open market value of £120,000 at a 35% discount, the average amount of discount is £33,500. K2.5 to K2.6 Sales: analysed by provider fees charged Here, SRB transactions are classified into two different bands, according to the amount of provider fees charged to the SRB agreement. Enter the total number of such sales in the ‘Number’ column and the total sales values of those agreements in the

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‘Amount’ column.
K2.7 Average fees charged
The average amount of provider fees are is recorded here. This value should be recorded in the ‘Amount’ column only. For example, if 8 new agreements were entered into during the quarter with provider fees totalling £4000, enter £500 (£4000 divided by 8) in the ‘Amount’ column. K2.8 to K2.9 Sales: analysed by annual rent as percentage of sale value K2.8 Here the total number of new SRB agreements (entered in the ‘Number’ column) and the amount of average monthly rent being charged at the outset of the agreements (entered in the ‘Amount’ column) is recorded. K2.9 The average rental yield percentage is calculated as the total annual rent for all new SRB agreements in the quarter divided by the total sales values, entered in the ‘Amount’ column. K3 SRB agreements terminated or transferred in the quarter This analyses SRB agreements terminated by either the provider or seller, and also those SRB agreements transferred to other parties. K3.1 to K3.6 Agreements terminated:
By firm:
This is where the seller has breached the terms and conditions of the SRB agreement and the provider has exercised the right to terminate the contract. Here, terminations are analysed according to the duration of the contract in particular time bands. For each time band, enter the total number of such terminations. At the end of the quarter, some or possibly all of these agreements in K3.1 to K3.6 will also be included in end-quarter figures at K1.7. Those not included may already have been disposed of (reported at K1.3), or sold or transferred to third parties (reported at K1.5). By seller:
This is where the seller has exercised the right to buy back the property under the SRB agreement, or where the seller has terminated the tenancy agreement before the end of the fixed term. Here, redemptions are analysed according to the duration of the contract in particular time bands. For each time band, enter the total number of such transactions. K3.7 to K3.9 Transfers and disposals

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Transfers
This covers SRB agreements which are sold or transferred to third parties, but where the contract itself remains in being. The analysis looks into the status of each SRB agreement when it is sold or transferred. Firms should report:
 original SRB values: the gross sales value paid to the seller;  current SRB values: the book value of the contract at time of sale/transfer; and  actual disposal/transfer values: the value of the contract as recognised in the agreement with the acquiring party. Disposals This covers disposals made during the normal course of business, and does not include business transfers. This is a further analysis of ‘disposals’ reported in K1.3. Firms should report:
 original SRB values: the gross sales value paid to the seller;  current SRB values: the book value of the contract at time of disposal; and  actual disposal/transfer values: the price obtained on sale (before deducting any costs of sale). K4 SRB agreements at end of quarter: cases 10% or more in arrears Firms should report those SRB contacts where the total amount of arrears on rental payments is 10% or more of the annual rental amount. Cases should be allocated to the relevant arrears band according to the percentage in arrears. For each arrears band, report the number of such cases, and the amount of arrears, and the amount of the expected annual rent on these cases. K5 SRB administrators Firms holding SRB administration permissions must complete the number of regulated SRB agreements that they administer, the number of non-regulated SRB agreements that they administer and the number of SRB agreements that they administer for other firms. The agreements administered for third parties must be further broken down by the number of SRB agreements administered for the largest

FCA 2017/XX five firms that they administer regulated SRB agreements for.
SECTION L: CREDIT RISK
Introduction
The purpose of this data item is so that a firm can provide an analysis of its credit risk capital requirement as calculated under MIPRU 4.2A, 4.2B and 4.2C. But this section does not apply to a firm which exclusively carries on home finance administration or home finance providing activities (or both) in relation to second charge regulated mortgage contracts or legacy CCA mortgage contracts (or both): see SUP 16.12.18BR, Note 4 . This data item is only relevant to firms that meet the criteria set out in note 2 of SUP 16.12.18BR. If that is the case then all relevant exposures must be included in the credit risk capital requirement calculation. See MIPRU 4.2A.4R. Please note that this data item is intended to be a summary of the credit risk capital calculation as calculated under MIPRU 4.2A, 4.2B and 4.2C and is not a detailed work schedule. Data elements: These are referred to by row first then by column, so data element 2B will be the row numbered 2 in column B.
Section L is structured in three parts. The first part (rows 1-7) focuses on the
breakdown of the credit risk capital requirement by types of exposure. The second part (rows 8-14) is a memo section that requests further detail on specific elements that will already be incorporated within the first part. The third part (rows 15 and 16) requests transaction level information on a firm’s securitisations.
Part 1 – Rows 1 to 7
This part of the data item focuses on providing a breakdown of a firm’s credit risk capital requirement under the two categories of ‘loans/exposures that are not securitised’ and ‘loans/exposures securitised’. The category ‘loans/exposures not securitised’ is further broken down into four loan/exposure types. A firm should report its credit risk capital requirement across the five loan/exposure types under the two categories of ‘loans/exposures that are not securitised’ and ‘loans/exposures securitised’ in rows 1 to 5. Please note: This part cannot be used as a worksheet to calculate the credit risk capital requirement for each loan/exposure type, because some loan/exposure types may contain more than one risk weighting within the row. Row 1 – Loans with mortgages on residential property A firm should include all loans entered into with mortgages on residential property that have not been securitised in this row. This includes loans that are past due, buy-to-let loans on residential property, second charge and subsequent mortgages on residential property, and mortgages on residential

FCA 2017/XX property irrespective of the loan to value.
Row 2 – Loans with mortgages on commercial property A firm should include all loans with mortgages on commercial property that have not been securitised in this row. This includes loans that are past due, buy-to-let loans on commercial property, and second charge and subsequent mortgages on commercial property. Row 3 – Other Loans A firm should include in this row all loans that are not included in rows 1, 2, 4 and 5. Row 4 – Collective Investment Undertakings A firm should include all positions in collective investment undertakings in this row. Row 5 – Securitisation (originated only) A firm should include all positions in assets that have been included in securitisations originated by the firm in this row. Rows 15 and 16 request further detail on these exposures. See MIPRU 4.2B for more information on calculating the credit risk capital requirement for securitisations. Column A A firm should report the exposure value of assets for each of the five loan/asset types. This should be the balance sheet value (i.e. net of any provisions). See MIPRU 4.2A.6R. Column B A firm should report here the amount of credit risk mitigation for each of the five loan/asset types. See MIPRU 4.2C. Column C A firm should report here any other credit valuation adjustments for each of the five loan/asset types. Column D For each of the five loan/asset types, a firm should report the total risk weighted exposure amount. A firm should have regard to MIPRU 4.2A.7R to MIPRU 4.2A.18G when calculating risk weighted exposure amounts. Column E This contains the credit risk capital requirement for each of the five loan/asset types, which is 8 per cent of the relevant risk weighted exposure

FCA 2017/XX amount in Column D.
Columns F and G
These are memorandum item columns. For each of the five loan/exposure types, a firm should report the total value of individual (specific) and collective (general) impairment balances/provisions that were made BEFORE arriving at the balance sheet exposure value of loans/exposures reported in Column A. 5A Total exposure value of securitisations This is the total exposure value of assets that have been securitised and originated by the firm. This should equal the sum of the value of assets reported in columns B, C and D of the table in element 15. 6A Total Exposure Value This is the total balance sheet value of assets that have been included in the credit risk capital requirement calculation, being the sum of data elements 1A to 5A. This should also be the value of assets reported in data element C4.2a in MLAR Section C. 7E Total credit risk capital requirement This is the total credit risk capital requirement, being the sum of data elements 1E to 5E. This should also be the credit risk capital requirement reported in data element C4.6(c) in MLAR Section C.
Part 2 – Rows 8 to 14
This part of the data item contains memorandum items on specific elements that have already been recorded in Rows 1 to 7. The aim of this part of the data item is to obtain targeted prudential information on certain loan types. As a result, a firm should not omit data from Part 2, because a firm has already included that data in Part 1. Equally, a firm should not omit data from Part 1, because the data will be included in Part 2. For example, if a firm has a past due loan on a mortgage on a residential property, that data should be included in the credit risk capital requirement calculation in row 1 and in row 8. Another example is a second charge mortgage on a residential property, where the data will be included in the row 1 and in row 13. Column A A firm should report the exposure value of assets for each specific loan type. This should be the balance sheet value (i.e. net of any provisions). See MIPRU 4.2A.6R. Column D For each specific loan type, a firm should report the total risk weighted exposure amount. A firm should have regard to MIPRU 4.2A.7R to MIPRU

FCA 2017/XX
4.2A.18G when calculating risk weighted exposure amounts. Column E This contains the credit risk capital requirement for each specific loan type, which is 8% of the relevant risk weighted exposure amount in Column D. Columns F and G For each specific loan type, a firm should report the total value of individual (specific) and collective (general) impairment balances/provisions that were made BEFORE arriving at the balance sheet exposure value reported in Column A. Row 8 – Past due item on loans with mortgages on residential property A firm should report in this row all past due loans with mortgages on residential property. See MIPRU 4.2A.17R. Row 9 – Past due item on loans with mortgages on commercial property A firm should report in this row all past due loans with mortgages on commercial property. See MIPRU 4.2A.17R. Row 10 – Past due items on other loans A firm should report in this row all past due loans on other loans. See MIPRU 4.2A.17R. Row 11 – Buy-to-let mortgages on residential property A firm should report in this row all buy-to-let mortgages on residential property. Row 12 – Buy-to-let mortgages on commercial property A firm should report in this row all buy-to-let mortgages on commercial property. Row 13 – Second charge mortgages on residential property A firm should report in this row all second charge and subsequent mortgages on residential property. Row 14 – Second charge mortgages on commercial property A firm should report in this row all second charge and subsequent mortgages on commercial property.
Part 3 – Rows 15 and 16
This part of MLAR MLAR Section L provides transaction-level information on the securitisations that a firm has originated. A firm will report each

FCA 2017/XX securitisation programme in a different row and complete columns A to L for each securitisation programme. Column A A firm should report the name of the securitisation programme. Columns B, C and D A firm should record the value of the securitisation that has been retained by the firm under each of the headings: Senior, Mezzanine and Equity. For the purposes of completing columns B, C and D of Part 3 of MLAR MLAR section L, Senior is the value of securitisation tranches that have credit quality step 1 (see the appropriate standardised approach table at http://www.fca.org.uk/your-fca/documents/fsa-ecais-securitisation), Equity is the value of securitisation tranches that have credit quality step 4, 5 or ‘all other credit assessments’ and Mezzanine is the value of securitisation tranches that are not Senior or Equity tranches. Purely for the purposes of completing columns B, C and D of Part 3, all unrated securitisation tranches should be classified as equity tranches. Columns E, F and G A firm should record the value of the securitisation that has been purchased by investors (and therefore no longer being held by the firm) under each of the headings: Senior, Mezzanine and Equity. For the purposes of completing columns E, F and G of Part 3 of MLAR MLAR section L, Senior is the value of securitisation tranches that have credit quality step 1 (see the appropriate standardised approach table at http://www.fca.org.uk/your-fca/documents/fsa-ecais-securitisation), Equity is the value of securitisation tranches that have credit quality step 4, 5 or ‘all other credit assessments’ and Mezzanine is the value of securitisation tranches that are not Senior or Equity tranches. Purely for the purposes of completing columns E, F and G all unrated securitisation tranches should be classified as equity tranches. Column H This is the total credit risk capital requirement for the assets that are included in the securitisation programme but before the effect of the securitisation. The value reported in this column should be based on all assets included in the securitisation programme even though a firm firm will subsequently retain only a portion of the securitisation. Column J This is the total credit risk capital requirement for the securitisation programme that has been retained by a firm based on the credit risk weights in MIPRU 4.2B.

FCA 2017/XX
Column K
This is the total significant risk transfer add-on that should be added to the capital requirement for the securitisation programme. Column L This is the total credit risk capital requirement for the securitisation programme. This should be the sum of columns J and K for each securitisation programme. 16L Total capital requirement after securitisation This is the total capital requirement for securitisation positions originated by a firm. This should equal the value reported in 5E.
SECTION M: LIQUIDITY
Introduction
The purpose of this data item is for a firm to confirm that it complies with the liquidity resources requirements in MIPRU 4.2D. But this section does not apply to a firm which exclusively carries on home finance administration or home finance providing activities (or both) in relation to second charge regulated mortgage contracts or legacy CCA mortgage contracts (or both):
see SUP 16.12.18BR, Note 4.
This data item is only relevant to a firm that does not have a restriction on its
Part 4A permission that prevents it from undertaking new home financing or
home finance administration (with mortgage assets on balance sheet) connected to regulated mortgage contracts. In relation to the questions in MLAR Section M Liquidity Questionnaire (with the exception of question 2), a firm should, as appropriate, answer “yes”, “no”, or “not applicable” For those questions where the answer is “no” or “not applicable” a firm must explain why in column B.
Part 1 – Adequacy of liquidity resources
Question 1 – In answering this question a firm should have regard to MIPRU 4.2D.2R and MIPRU 4.2D.3G. If a firm answers “no” or “not applicable”, it should explain why in column B and the firm does not need to complete the rest of MLAR Section M. Question 2 – In deciding on the amount of liquidity resources that a firm holds or is able to generate a firm should have regard to MIPRU 4.2D.3G. The figure should be entered in 000’s.
Part 2 – Systems and controls
Question 3 – In answering this question a firm should have regard to MIPRU 4.2D.4R and MIPRU 4.2.D.5R.

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Please note that Part 5 of MLAR Section M covers senior management oversight separately.
Part 3 – Stress testing
Question 4 – In answering this question a firm should have regard to MIPRU 4.2D.8R, MIPRU 4.2D.10R and MIPRU 4.2D.11G. Question 5 – In answering this question a firm should have regard to MIPRU 4.2D.8R, MIPRU 4.2D.9R(1) and (2), MIPRU 4.2D.10R and MIPRU 4.2D.11G. Question 6 – In answering this question a firm should have regard to MIPRU 4.2D.9R(1) and (2). Question 7 - In answering this question a firm should have regard to MIPRU 4.2D.9R(3).
Part 4 – Contingency funding plans
Question 8 - In answering this question a firm should have regard to MIPRU 4.2D.13R. Question 9 - In answering this question a firm should have regard to MIPRU 4.2D.13R(2)(a).
Part 5 – Senior management oversight
Question 10 - In answering this question a firm should have regard to MIPRU 4.2D.6R. Question 11 – In answering this question a firm should have regard to MIPRU 4.2D.7R. Question 12 – In answering this question a firm should have regard to MIPRU 4.2D.10R, MIPRU 4.2D.13R and MIPRU 4.2D.14R.