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FSA warns of crackdown on mortgage brokers

The FSA has warned that it will come down hard on mortgage brokers that flout the rules after it fined two firms and banned a third for sub-prime failings.

The brokers are among the five mortgage firms that the regulator flagged up at the end of its sub-prime investigation published in July. Head of retail enforcement Jonathan Phelan says the other two firms are still being investigated.

The FSA fined The Loan Company, trading as Greenhill Finance, £31,500 and Next Generation Mortgages Limited £10,500. It has also stopped Homebuyer Securities Limited from trading.

As a result of advice failings, NGM has agreed to stop selling self-certification mortgages, which require verification of income by lenders, due to FSA concerns and HSL has agreed that its director will never work as a mortgage broker again.

All three companies have been required to conduct a review of past business to identify whether customers have suffered losses as a result of receiving unsuitable advice.

Phelan says the problems essentially come down to treating customers fairly. “It is an old message but a continued message. If firms are misbehaving, then they need to know that they are definitely not under the radar.”

Phelan says he came across one case where a customer wanted to borrow £5,000 by remortgaging. The broker failed to tell the borrower that he would be charged as much as £5,000 in fees.

“Having to pay £10,000 to get £5,000 is definitely not treating customers fairly,” says Phelan.

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