Brokers should not be tempted to use bridging for inappropriate cases in order to shore up their business during difficult times, according to the FSA.
At the Mortgage Business Expo in London yesterday, FSA director of conduct policy Sheila Nicoll told delegates: “We understand that the market is difficult for brokers, but one repeated concern we have is that current pressures could push people towards solutions that could at best be described as imaginative.
“For example, bridging loans have clear consumer benefits in unlocking property chains but they are likely to be a far less appropriate option for those borrowers in payment difficulties who may simply be putting off the inevitable by taking out a bridging loan.
“Other ’imaginative’ solutions include using buy-to-let for customers who cannot verify the income for the property they want. But if the borrower is going to live in the property you may find yourself involved in a fraud.”
PMS executive chairman John Malone, who represents brokers on the National Fraud Authority’s mortgage fraud forum, told delegates the bridging sector is a major area of concern for fraud at the moment.
He said: “The short term finance sector is an area of fraudulent activity. It is an area we know the FSA is going to look at very carefully. It is an area we are concerned about.”
Malone adds that there are many people who took out bridging loans to buy property a few years ago with the hope of getting a mortgage now, but they have still been unable to qualify for a mortgage as the market has not recovered as they hoped, and many of these people will now have their properties repossessed.