Liberal Democrat Shadow Chancellor Vince Cable wrote to FSA chairman Lord Adair Turner after being contacted by the whistleblower. He is calling for an investigation into the claims.
The former supervisor, who worked in the retail firms division, claims the FSA ignored a warning in 2006 that self-cert loans had been bundled up and sold to building societies that thought they were buying conventional mortgages.
The FT reports that in late 2005 and early 2006 the supervisor took part in thematic reviews of mortgage books bought by building societies from wholesale lenders. It emerged that one book, which was classified as having full evidence of borrowers’ incomes, in fact contained no proof of income for any of the loans.
The whistleblower claims the FSA turned a blind eye to this, only sending out a general letter to building society chief executives reminding them to ensure their due diligence is thorough.
An FSA spokeswoman denies the claims, saying they “bear no relation to reality”, and adds that the regulator will respond to Cable “in due course”.
She says: “Whether that response becomes public is a different matter.”