Lesley Titcomb said: "I am speaking to you at a time of great challenge - for intermediaries, for lenders, for consumers and for the FSA. We are all feeling the effects of the correction of the credit and housing bubbles. The resulting credit crunch has hit the mortgage industry harder than most."
She went on to highlight the key risks that the FSA sees in the mortgage intermediary sector including inadequate standards of competence and professionalism, unsuitable advice, and inadequate financial resources and business model sustainability.
"It is clear that all firms - particularly intermediaries - have a lot on their plate at the moment. But I don't want to see people lose their focus on their regulatory responsibilities. Meeting these becomes even more important during a difficult trading environment."
The speech also drew attention to a newly emerging risk of 'phoenix firms' in the mortgage sector - where directors of one firm try to close it and transfer all the business to a new entity leaving only the liabilities behind. The FSA is tackling this by requiring directors to sign undertakings to honour the liabilities in relation to customer claims on their previous business; to 'ring fence' funds to be held by the departing firm to meet any further potential liabilities; and refusing the application for authorisation of the new business where the directors could not show they shut down their previous business in an orderly manner.
The speech also reminded the audience that from April next year, the FSA will extend the ‘common platform' to mortgage intermediaries. This is a term used to cover rules relating to business continuity, risk control, outsourcing and conflicts of interest which are in the FSA's Senior Management Arrangements, Systems and Controls (SYSC) Handbook.
