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FSA warns of B2L fraud to escape mortgage checks

The FSA believes there is an increasing risk of buy-to-let mortgages being used fraudulently by borrowers and mortgage intermediaries to get around tougher affordability checks required for residential mortgages.

The regulator published its retail conduct risk outlook yesterday, which sets out what the FSA sees as the most significant risks in the retail investment market over the next year to 18 months.

The buy-to-let market is currently unregulated. The FSA has said previously it sees the benefits in regulating the sector, but the Government is yet to make a decision on this.

In the risk outlook the FSA says: “We are seeing anecdotal evidence of unregulated buy-to-let mortgages being used fraudulently as a replacement for regulated mortgage contracts, as borrowers and intermediaries seek to circumvent more stringent income and affordability checks. These instances of misconduct could increase.”

The regulator says this is likely in light of tighter controls around self-cert mortgages.

It adds: “The pressure to achieve greater margins on overall lending, given the current low returns available, and increasing competition in the buy-to-let market, might encourage firms to engage in this type of behaviour.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. This is the same FSA that approved self cert income mortgages and it knows which lenders have been involved in fraudulent lending, but does nothing about it ! WHY ?

  2. There is an easy answer to this regulate buy to let mortgages – it was a mistake to make these loans deemed to be commercial in the first place. Just another symptom of why we had rapid growth in the housing market of last 13 years pre-2007.

    Could the FSA start doing their job please and regulate all mortgages connected with residential property.

  3. Talk about a dying predator. In it’s last breath writhings, the FSA is lashing out and attacking everything within reach. In its wild lashings, it is hitting everything and do you know?, this is where IFA’s and mortgage brokers come into their own, by doing a fact find and offering appropriate, tailored advice. The FSA give no guidance but use a blunderbuss of disjointed pronouncements in a negative manner and I’m fed up with it!!!!

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