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FSA to make lenders solely accountable on affordability

Lenders are likely to be forced to take full responsibility for assessing the affordability of mortgages under new guidelines being proposed by the FSA, Money Marketing understands.

The FSA’s mortgage conduct of business white paper, due to be published in mid-October, will set out new plans for regulation of the mortgage market. Currently, the responsibility for assessing affordability is shared between brokers and lenders but sources close to the regulator say this is set to change.

MM understands that lenders, particularly those on the high street, are fighting against the proposal, which aims to eliminate affordability problems that occur mainly in the sub-prime and right-to-buy markets.

The Council of Mortgage Lenders and the FSA declined to comment.

The Association of Mortgage Intermediaries supports the shift in responsibility for affordability in the second of three papers it is submitting to the FSA ahead of the Mcob review.

Director Robert Sinclair says it is the role of a broker to decide whether or not a mortgage is appropriate for a consumer but responsibility for affordability must fall on the lender. He says: “The ultimate responsibility for a lending decision must rest with the lender. Ongoing affordability cannot be regulated, as this is down to a borrower’s behaviour and circumstances. Arrears and repossessions tend to occur due to changes in personal circumstances. As such, they are not a direct indication of suitability or affordability.”

The AMI is also calling for individual mortgage brokers to be FSA-regulated as well as for regulation of aggregator, lead-generation and price-comparison websites. It is lobbying against product regulation and also wants self-certification to remain available to some borrowers, procuration fees to remain unrestricted and a more robust disclosure regime to separate unbiased advice and sales.

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