The FSA has revealed the results of its compliance review of small mortgage brokers, looking at requirements on selling and advising in the non-conforming market, highlighting both good and bad practices.
Of the 31 firms visited, 58 per cent intended to review a customer’s non-conforming product at some point in the future once their credit profile had been rehabilitated and 65 per cent said their practice was to issue suitability letters outlining the reasons for a recommendation.
Three firms were identified as potentially assisting customers to obtain a mortgage where their income would not meet the lender’s criteria, for example, by possibly inflating income on the application form.
These firms have been referred to enforcement for further investigation.
However, the FSA also found in 60 per cent of cases insufficient information was obtained about the customer in key areas relating to the sale of non-conforming products.
In 67 per cent of those cases which involved debt consolidation, firms could not demonstrate they’d taken account of the additional requirements related to these products and so it was unclear whether the recommendation was appropriate.
Andy Watson, head of mortgages and credit union department at the FSA, said: “We are publishing examples of good and bad practice in a briefing note going up on our website this week and we will be working with firms to raise the standard of non-conforming sales and advice.”
Ben Stafford, head of policy at AMI, said: “Focusing on the positives, the results show the majority of advice being given is of a high standard but the three firms identified by the FSA cannot be defended. Advisers must look at improving their paper-trails.”
