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FSA berates negligent mortgage brokers

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by Gill Montia

The Financial Services Authority (FSA) is warning mortgage brokers that it will take strong action against any firms found to be acting dishonestly.

The authority has discovered “many serious failings” among brokers dealing in self-certification mortgages.

It believes that the breaches, which are either caused by “negligence or wilful non-compliance”, are undermining the reputation of conscientious brokers.

According to FSA spokesman Stephen Bland: “There are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry.”

So far this year, the FSA has undertaken four reviews of mortgage brokers. Seven more brokers are due to be investigated and 65 have been told check their work.

Mr Bland reported that the FSA has “found some firms willing to offer mortgages they know to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible.”

Responsibility for regulating the sale of mortgages was assumed by the FSA in 2004, since when it has identified so-called “self-certification” mortgages as a problem area.

If brokers fail to ask for evidence of income, even when the figures were implausible, not only are borrowers at risk of not being able to meet their repayments but in addition, lenders can be exposed to fraud.

The Council of Mortgage Lenders (CML) has endorsed the FSA’s warning stating that: “The CML supports action against brokers which fail to address compliance weaknesses … these findings are a wake-up call to those brokers who are behind the pace”.

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News posted: November 26, 2007

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