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FSA starting new probe into self-cert

The FSA is to investigate self-certification mortgages again, less than two years after giving the sector a clean bill of health in a previous investigation.

The regulator’s second examination comes on the back of industry criticism of its first attempt in February 2003 and allegations that some brokers are continuing to encourage clients to inflate their salaries to qualify for self-cert mortgages, as alleged in a BBC Money Programme investigation in January 2003.

The new investigation will include mystery-shopping and a supervisory exercise. It is understood that the regulator has already questioned between 30 and 50 broker firms to determine whether adequate checks and balances are in place when advising on self-cert as well as making sure that lenders’ systems are robust.

This will go much further than the FSA’s first investigation, which law firm Clarke Willmott found to be “limited” using material received in July under the Freedom of Information Act.

The FSA confirmed to Money Marketing that it did not have the resources available at the time to carry out this project.

FSA spokesman Robin Gordon-Walker says: “One of the things 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.”

Clarke Willmott partner Philip Tebbatt says: “I did not detect much of a change in practice either from lenders or brokers following the FSA’s original investigation. It appears that our fears have been justified. This announcement is a mixed blessing. On the one hand, we have been listened to. However, in other ways, there is the potential that this will bring a lot of people some headaches.”

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