As the US Congress continues to work through proposed financial regulatory reforms with the consumer in mind, Her Majesty's (HM) Treasury proposed new regulations it said will strengthen consumer protections for UK borrowers whose mortgages are sold to third parties. According to a consultation document the Treasury published (available to download here), borrowers would be afforded protection by the Financial Services Authority (FSA) — the non-governmental body responsible for regulating most financial services markets, exchanges and firms in the UK. The proposal would extend the scope of FSA regulation to include second-lien and buy-to-let mortgages and protect borrowers when lenders sell on mortgage books to third parties. It would also provide borrowers who experience problems with a means of redress through access to the Financial Ombudsman Service (FOS), the Treasury said. In 2004, the UK Treasury granted the FSA the authority to regulate first-lien mortgages, including ensuring lenders treat customers fairly and use foreclosure as a last resort. The proposal would again expand the scope of the FSA’s powers, to include regulation of second-lien and buy-to-rent mortgages, power currently held by the UK Office of Fair Trading (OFT). The proposal would also afford borrowers FSA protection when their mortgage is sold to a third party, including regulations requiring fair treatment of customers. This opens the door for investor entities not currently regulated by the FSA to be subject to the organization’s regulation. “Since the onset of the global financial crisis, the Government has worked hard to ensure mortgage borrowers are treated fairly by their banks. Our focus has been to do all we can to make sure people can stay in their homes and to limit repossessions as much as possible,” said exchequer secretary, Sarah McCarthy-Fry. “But we are aware that this crisis has raised issues around the world about the regulation of the mortgage market. We are determined to reform the system for the future, to offer both stronger protection for consumers and greater stability in the housing market,” she added. The UK government will accept comments from the public until February 15, 2010 on the proposals before issuing a final ruling. Write to Austin Kilgore.