Explanatory note
(This note is not part of the Order)
This Order amends the Building Societies (Designation of Qualifying Bodies) Order 1988, which designates corporate bodies and types of corporate body as suitable for investment or support by building societies under section 18 of the Building Societies Act 1986, so as to add “appropriate mortgage company” as a further type of designated body.
An appropriate mortgage company is a company limited by shares which is formed for, or whose objects include, carrying on one or both of the activities of:
acquiring, holding and disposing of existing mortgage debts, and
lending money on mortgage,and which does not engage in activities such as market making, general deposit-taking and estate agency work (article 2 and Schedule, paragraphs 1(b), 3 and 4). It does not have the capacity to have subordinate organisations and is designated as suitable for investment and support by a building society, but not for support in the absence of investment (article 2 and Schedule, paragraph 1(b) and (c)). Investment is defined by section 18 of the Act as acquiring and holding shares in and forming, or taking part in forming, bodies corporate. Support is defined by that section as the provision of loans, grants, guarantees, services or property to bodies corporate.
In relation to secured loans which it makes, there is a requirement that the company maintains systems similar to those required of building societies for the safe custody of documents and for assessing the adequacy of security. Secured loans by the company are required to be transferable without the consent of the borrower, and must be loans which the society itself would have had power to make had the borrower been a member of the society (article 2 and Schedule, paragraphs 1(e) and 2).