Watchdog clears 'self-cert' mortgages
11 February 2004
Mortgage providers already have adequate controls to sell self-certification mortgages, Britain's financial watchdog has found.
Following allegations made by the BBC's Money Programme the Financial Services Authority (FSA) today concluded "lenders' controls are generally appropriate for this business" and it has written to chief executives of major lenders with its findings.
The BBC show claimed some house buyers were being encouraged to lie about their income in order to get mortgages.
But the FSA said the number of customers who encountered difficulties with repayments were currently "not significantly higher" than people with standard mortgages.
"This suggests that borrowers have not been taking on larger mortgages than their income would justify," the FSA said.
The Council of Mortgage Lenders (CML) welcomed the findings of the review.
Michael Coogan, director general of the CML, noted: "It is reassuring that the regulator's review does not find any evidence of widespread abuse of lending practices.
"However, we would endorse the FSA's view that each firm should continue to evaluate the effectiveness of their controls in relation to self-certification and fast-track lending."
Currently lenders do not require documentary evidence of borrowers' incomes for self-certification mortgages. Fraud experts have pointed out that a gap in the law means mortgage fraud is almost impossible to convict someone for - although legislation to close this loophole has been drafted and is awaiting Parliamentary time.
Self-certification mortgages account for six per cent of overall mortgage balances.