The FSA visited 51 small mortgage firms from across the country looking at selling practices and training and competence. The majority of firms visited were identified as 'higher risk' based on information gathered at authorisation and the fact that some had not been registered with the Mortgage Code Compliance Board.
The results showed that 50 per cent of the firms had either no or minor failings and the senior management in most of the firms had implemented appropriate systems and controls. Some examples of good practices were:
-Senior management have a strong understanding of their requirements
- Ongoing training activity is being undertaken and recorded
- Firms are retaining sufficient evidence to demonstrate suitability of recommended mortgage contracts
-Evidence of product research is being conducted
Andy Watson, Head of Mortgages and Credit Unions Department at the FSA, said: "Our findings are encouraging for an industry six months into regulation. The progress of 'higher risk' firms was a particular interest and whilst expecting to find failings we were encouraged by what we saw. However, as the enforcement action we have taken shows, we want firms to understand we are prepared to be tough and will take action where serious failures are found."
Following the review three firms were referred to enforcement for non-disclosure of adverse information during the authorisation process. A further two firms are in the process of being issued with private supervisory warnings. Additionally the management of a further firm agreed to cease trading and vary its permission for failing to hold adequate qualifications to write mortgage business.
Watson said: "The FSA will not tolerate non disclosure or fraud and any firm found to have committed either will be referred to enforcement. We will continue to work closely with firms to help them improve standards and ensure they are treating customers fairly."
A further review of post authorisation issues is planned for the end of the year.
