The regulator is said to be concerned about certain aspects of the non-conforming market, particularly self-cert and the ‘fast-track’ processes used by lenders in this area. One of the main issues of concern in the self-cert arena is borrowers’ overstating their level of income in an attempt to get larger loans.
Fast-tracking enables lenders to reduce the time needed to process an application by only asking for a limited amount of supporting documents and not asking clients to verify income.
Speaking to Mortgage Introducer, the source said: “The FSA has said it has started a project looking at the way in which the non-conforming sector operates. It is looking at this from both a lender and broker perspective and has said it is still particularly concerned about self-cert mortgages.”
The FSA has already launched investigations into the equity release sector and the issues surrounding mortgage disclosure. These are both coming to fruition now, an FSA spokesperson said, with the results announced in due course. The FSA is also thought to looking at interest-only mortgages after voicing concerns about whether customers are being advised to take out a repayment vehicle to secure the loan.
Before regulation in 2004, the FSA wanted self-cert mortgages to only be available to the self-employed. Following industry lobbying, it did a u-turn on this.
Rob Griffiths, associate director at the Association of Mortgage Intermediaries, confirmed the FSA has said it will be revisiting the self-cert arena. He said: “The FSA has confirmed it will be revisiting self-cert during the course of 06/07 as part of its small firms objectives. It remains concerned about the suitability of recommending self-cert products to clients and advisers must keep records of why that product was recommended to their client, particularly if they are employed.”
The FSA refused to comment on the speculation.
