The Financial Services Authority has carried out a review and subsequent crackdown in order to bring justice to mortgage providers which have misled customers and encouraged them to take out "unaffordable" loans.
The FSA intends to name and shame at least seven mortgage brokers which they have found to be guilty of failing to monitor the treatment of their customers to ensure they are treated fairly. Some have been ordered to cease trading until new systems are in place, while others will face huge fines.
The review was carried out across the market, including prime and sub prime providers, and examined brokers' assessment of affordability, self-certification, as well as training and competence. Self-cert mortgages were found to be particularly poor in performance, as brokers have been encouraging customers to misrepresent their financial situation in order to gain a footing on the property ladder.
First time buyers, low income families, and those with a poor credit history have been targeted by unscrupulous lenders who were trying to boost sales. These people could come tumbling back down if they cannot keep up with repayments and their house is repossessed.
The FSA found that a quarter of the brokers surveyed were giving customers bad advice, and has said that lenders must be more stringent when it comes to determining affordability, paying more attention to individual customers' needs and circumstances.
Stephen Bland, FSA Retail Intermediary sector leader, said: "We 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. These practices are completely inconsistent with Treating Customers Fairly."
He also said that the reputation of honest mortgage brokers is being tainted by the actions of a few, and that there is "an unacceptable number of firms unwilling to change and they are damaging the rest of the industry."
Michael Coogan, director general at the Council of Mortgage Lenders, commented: "After three years of regulation, the FSA is right to expect its regulatory standards to be in place across the whole market. These findings are a wake-up call to those brokers who are behind the pace." Compare Mortgage Deals
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