Broker closed for sub-prime mortgages while two are fined

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by Kay Murchie

A mortgage broker has been shut down while two others have been fined for mis-selling sub-prime mortgages.

Sub-prime mortgages are those sold to people with a poor credit rating or who do not have secure jobs and who are supposed to show they have the income required to make the repayments.

The Financial Services Authority (FSA) has closed down Redditch-based Homebuyer Securities because it used unqualified advisers. Its director has agreed not to work as a mortgage broker again.

Furthermore, Cheshire-based The Loan Company has been fined £31,500 for providing inconsistent information to customers and for not doing enough to see whether they could really afford the mortgage they were taking on.

In addition, Next Generation Mortgages in Cardiff has been fined £10,500 because it has neglected to explain the risks of its mortgage deals and for not doing enough to asses its customers properly.

The FSA said the firms had put their customers’ interests at risk through inadequate sales and advice procedures.

Margaret Cole of the FSA said firms who do not abide by FSA standards taint the whole mortgage industry which is totally unacceptable. Ms Cole warned those firms who put their customers at risk of receiving unsuitable advice through inadequate business processes can expect strong action from the FSA.

All 3 firms were caught out after the FSA spent over 12 months investigating the way that sub-prime mortgages are sold. The 3 companies are now looking back though their books to establish whether any customers have actually suffered any financial loss.