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FSA reopens self-cert case

The FSA is going back to investigate the self-certification mortgage market clearing the sector just two years ago after a probe by the BBC’s Money Programme claimed to uncover malpractice.

The regulator confirmed last week that between 30 and 50 broker firms have been investigated, with a mixture of mystery-shopping and face-to-face research. Fifteen lenders are understood to have received questionnaires from the FSA on the robustness of their procedures.

BM Solutions, which was one of the companies featured in the Money Programmne and is one of the most successful lenders in the self-cert market, has not been contacted , according to head of PR Matthew Grayson.

The self-cert probe follows a sub-prime investigation which claimed to show that responsible advice was lacking in some cases.

FSA spokesman Robin Gordon-Walker says: “One of the things that we indicated after M-Day was to look at sub-prime and self-cert. It could be said that there may be some potential for not following the rules in this area. It was definitely an area which warranted a look.”

Law firm Clarke Willmott also thought that self-cert required investigation. In July, under the Freedom of Information Act, it obtained some details of the FSA’s self-cert investigation. The regulator had cleared the industry but Clarke Willmott believed that the investigation was limited in its scope. The FSA admits that at the time, it did not have the resources for the project.

Clarke Willmott partner Philip Tebbatt says: “I did not detect much change in practice from lenders or brokers following the FSA’s original investigation. It appears that our fears have been justified.”

Clarke Willmott acts for a number of lenders in the sub-prime sector and felt obliged to find out for itself the extent of the FSA’s invest-igation to protect the inter-ests of its clients.

Tebbatt says: “The clean bill of health did not sit comfortably with the responsible lending rules. It was clear to me that it would be slightly foolish to rely on the FSA’s preliminary conclusions and to take it at face value. The data that the FSA got was, in my view, superficial and not rep- resentative of the number of players in the market.”

Cartel managing director Carl Wright says the impact of the new investigation could be as far reaching as to destroy the packager market.

He says: “I think that we will find a huge can of worms. When it first came to the market, it did not put its house in order from day one. If there ever was going to be a market for fraud, it would be in sub-prime and self-cert.

“What we are going to see is the acceleration of the death of packagers. Lenders are going to find themselves squeezed through high competition and regulation. They will find that they do not need packagers. They will have to look at the B to C channels or become networks.”

Hamptons International Mortgages technical director Jonathan Cornell is not surprised that the FSA has decided to revisit what he calls a “high-risk area”.

But he does not think that self-cert is the ticking timebomb that many believe it to be and says most of the top broker firms implement robust procedures to safeguard the interests of all parties involved but there is one area where he is concerned.

He says: “I have mixed feelings about self-cert for employed people who have no evidence of having a second job. The idea of true self-cert, where no enquiries or references to accountants or employers are made at all in most circumstances, and the marketing associated with that is what worries me the most.”

Platform sales and marketing director Guy Batchelor expresses similar fears, wondering how the marketing of true self-cert may send out conflicting messages to consumers.

For many lenders, self-cert is big business. Mortgage Express managing director Tim Dawson says self-cert makes up 20 per cent of the firm’s overall business, with changing demographics and social make-up of the market spurring the need for the products.


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