The Financial Services Authority (FSA) yesterday warned that there are a significant number of
mortgage brokers who are not giving adequate advice on
sub prime lending.
Currently three
companies are under investigation for inflating the
income of potential
buyers so they qualify for loans. In total the FSA visited the premises of 31
brokers that offer
sub prime mortgages and viewed 210 files to establish whether or not the
mortgages offered met customer's needs.
Their findings revealed that in six in ten instances brokers did not obtain sufficient information from customers. Eight out of ten cases showed no evidence of the loan meeting the customers' needs. Lastly where customers were looking to
remortgage to clear outstanding
debts, two thirds of cases could not prove that their advice was good or adequate.
Andy Watson, head of mortgages at the FSA, said: "Sub-prime is a growing area of the market and we have identified it is a priority area for our supervision.
"We are publishing examples of good and bad practice on our
website and we will be working with firms to raise the standard of sub-prime sales and advice.
"It's hard to establish the level of consumer detriment or potential mis-selling as many of the failings related to poor record keeping.
"Where we find examples of possible inflation of incomes, we will make further enquiries which may lead to referrals and enforcement."
The FSA is planning a further review of sub-prime
lending next year. You can call the FSA's consumer helpline on 0845 606 1234 or log on to
www.fsa.gov.uk.
