Brokers accused of offering unaffordable homeloans

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by Kay Murchie

Mortgage brokers are being accused of selling mortgages to applicants who cannot afford to reapy and accepting false earnings information. An investigation by the Financial Services Authority (FSA), established that some brokers are not meeting required standards and undermining the industry with negligence.

The financial watchdog said the investigation also revealed that senior management were negletcting to satisfactorily monitor and control their firms’ performance to ensure they were treating customers fairly.

Seven companies have been referred to the FSA’s enforcement division, while others have been considered for referral. 65 firms have been instructed to perform past business reviews, or employ specialists to resolve their problems.

The failings emerged after 4 reviews of 345 mortgage brokers operating in both the prime and sub-prime markets carried out between June and September.

Stephen Bland of the FSA said during the reviews they saw a number of good brokers who are meeting the required standards and they are being undermined by the negligence or wilful non-compliance of others. However there are still an unacceptable number of firms reluctant to change and they are damaging the rest of the industry.

The Council of Mortgage Lenders (CML) has welcomed the review but said it needed to be as clear and unambiguous as possible. Michael Coogan of the CML said the findings are a warning to those brokers who are behind the pace.