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FSA looks at UK sub-prime mortgage lenders

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by Elaine Frei
FSA looks at UK sub-prime mortgage lenders

With sub-prime mortgage lenders in the United States in the midst of somewhat of a crisis, the Financial Services Authority (FSA) wants to make sure that UK borrowers who secure sub-prime loans – either through convenience or because that is their only option – are being treated with fairness by lenders. The FSA’s inquiry follows its look last year at traditional mortgage lenders. In that investigation, the FSA found that borrowers shop around for the best deal on a mortgage than they did in the past and that they are better informed about the process involved in mortgages.

The main concern of the FSA in the current investigation is to determine that that its regulations aimed at sub-prime lenders are protecting borrowers. It will look at how borrowers are treated from the time they apply for the loan until it is paid off, and will also include examination of how borrowers who get behind on their payments are dealt with. This is especially applicable to the sub-prime market, considering that these mortgages often go to people with poor credit histories who have no other options when it comes to buying a house and that interest rates on sub-prime loans are typically higher than interest paid on traditional mortgages.

The FSA plans to complete its investigation of sub-prime lenders by the end of the year. It says that the inquiry could result in stricter rules on sub-prime lending.

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News posted: April 10, 2007

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