Some mortgage advisers could find themselves being denied authorisation when the Financial Services Authority (FSA) regulates the mortgage industry next year, according to Reynolds Porter Chamberlain, the leading commercial law firm.
In the wake of recent allegations that some mortgage brokers advised customers to lie about their income on applications for self-certification mortgages, those involved could find this behaviour being taken into account in October 2004 by when all mortgage advisors must have obtained authorisation from the FSA.
So, even if they escape a criminal prosecution for their actions, those found to have advised borrowers to falsify their application forms may find themselves unable to do business by the end of next year.
Explains Jonathan Davies, partner at Reynolds Porter Chamberlain: "This week’s exposé on the alleged behaviour of some mortgage brokers is a fine example of why regulation of mortgage advice will be good for the industry, their customers and their professional indemnity insurers."
Until now, mortgage advisers have only been subject to self-regulation through the "Mortgage Code". In October 2004 regulation will become compulsory under the Financial Services and Markets Act.
Comments Davies "The FSA have certain core principles. One is that a firm must conduct its business with integrity, and another is that in order to be an authorised adviser you must satisfy the FSA that you are a fit and proper person."
"If a mortgage broker is advising customers to lie to mortgage lenders, whether or not this is a criminal offence or leads to prosecution, the broker is not acting with integrity and may not be regarded as fit and proper.
"All existing mortgage brokers will have to obtain authorisation by next October. The FSA will presumably take their past conduct into account when deciding whether they are fit and proper."
