News: FSA slams dishonest mortgage brokers

Tue, 27 Nov 07

The Financial Service Authority (FSA) has threatened strong action against dishonest mortgage brokers, reports the BBC...

It said there were "many serious failings" among brokers who sell self-certification mortgages. And it said good brokers were being undermined by the "negligence or wilful non-compliance" of others.

The FSA staged four reviews of mortgage brokers this year, and has referred seven more firms for investigation and told 65 more to check their work.

"There are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry," said Stephen Bland of the FSA.

"We found some firms willing to offer mortgages they known to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible.

"These practices are completely inconsistent with treating customers fairly - hence the large number of enforcement referrals and other regulatory actions," he said.


The FSA has been responsible for regulating the sale of mortgages since 2004 and has found it an area of the financial services industry with considerable problems.

The main one is that of so-called "self-certification" mortgages, where someone produces their own paperwork to show that they can afford to repay the loan they want to borrow. Failing to ask for evidence of income, even when the figures were implausible, exposed lenders to the possibility of fraud, warned the FSA.

The regulator blamed senior management of some broking firms for the problems, accusing them in some cases of failing to run their firms or control their staff properly. The FSA's warnings were endorsed by the Council of Mortgage Lenders (CML), which pointed out that the regulator's views related to brokers, not lenders.

"The CML supports action against brokers which fail to address compliance weaknesses when drawn to their attention by the FSA," said CML director general Michael Coogan.

"These findings are a wake-up call to those brokers who are behind the pace," he said.

Enforcement action

Several broking firms have been fined or closed down so far this year by the FSA. A further seven are now being investigated, which could lead to them being censured, fined or even closed down as well.

The 65 which have been told to go back through their books and papers, to make sure they sold the mortgages properly, are also suffering a punishment as this process will be costly and time consuming.

Earlier this month one broker of sub-prime mortgages was closed down and two others fined after the FSA decided that they "had put their customers' interests at risk."

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