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.