The Financial Services Advisory has referred seven mortgage brokers to enforcement and has forced a further 65 to undertake costly past business reviews, after a review of business practices in the sector.

The enforcement process will last several months and could see firms fined or individuals censored for failings.

Breaches highlighted in the reviews included arranging mortgages despite doubts about the accuracy of financial information provided by customers, and offering mortgages known to be unaffordable to borrowers.

The FSA said that several brokers ‘continue to operate well below standard, with senior management failing to adequately monitor and control their firm’s performance to ensure that they are treating their customers fairly’.

The regulator is also considering referring approximately 10 more firms for enforcement, while four have ceased business until they can rectify their failings.
The reviews, which surveyed the practices of 345 firms, looked into assessment of affordability, self-certification mortgages, training and competence standards, and the effectiveness of senior management controls.

Stephen Bland, FSA retail intermediary sector leader, said, ‘During the reviews we 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.

‘We also saw some who despite having some way to go, were willing to engage with us and be helped to improve their performance, which is why we are providing so much guidance following these reviews.

‘However there are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry.

‘Overall there is a need for a big improvement in senior management's use of management information to help achieve the fair treatment of their customers to achieve the progress we and the industry as a whole want to see.’

The FSA will begin a further review in January 2008 of mortgage quality of advice processes, and it is looking to report a considerable improvement when the work is concluded in June 2008.

The watchdog is also currently carrying out a related project which is looking at the extent to which lenders are meeting the requirement to lend responsibly and expect to report the findings of this in spring 2008.

Source: Citywire