An unspecified number of other firms are also being considered for referral as a result of reviews which assessed affordability, self-certification mortgages, training and competence standards, and the effectiveness of senior management controls.
The FSA has said that in spite of smaller improvements, the advisory standard of some mortgage brokers continues to fall below the required level in advance of the 'Treating Customers Fairly' (TCF) deadlines - with the investigation confirming many serious failings, including readiness to proceed with arranging a mortgage despite doubting the accuracy of financial information customers were giving them.
As part of this latest move, the regulator has announced that a further 65 firms are to undertake costly past business reviews or will employ specialists to resolve problems, with a few firms ceasing business completely until they can rectify their failings.
Stephen Bland, FSA Retail Intermediary sector leader, said that above board brokers were being undermined by those who were either negligent of willfully non-compliant.
“During the reviews, we saw some brokers who despite having some way to go, were willing to engage with us and be helped to improve their performance, which is why we are providing so much guidance following these reviews. However there are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry.
“We found some firms willing to offer mortgages they know to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with TCF - hence the large number of enforcement referrals and other regulatory actions.
"Overall there is a need for a big improvement in senior management's use of management information to help achieve the fair treatment of their customers to achieve the progress we and the industry as a whole want to see.”
Brokers have now been urged to immediately reassess their current standards of practice in order to avoid being pulled up.
The FSA has outlined the main areas for improvement which are repeatedly being found wanting. These include the assessment of affordability; the collection of customer information to establish clients' needs and, if needed, to judge plausibility of incomes in self-cert business; supervision and assessment of advisers' competence; and the use of management information.
The FSA will begin a further review in January 2008 of mortgage quality of advice processes, and it is looking to report a considerable improvement when the work is concluded in June 2008. The regulator is also currently carrying out a related project which is looking at the extent to which lenders are meeting the requirement to lend responsibly and expect to report the findings of this in spring 2008.
The FSA is also publishing case studies and examples of good and poor practice to help firms assess and improve their own progress, a move the Council of Mortgage Lenders (CML) has welcomed.
However the CML has asserted that the findings relate only to brokers, and not to lenders.
CML director general Michael Coogan, said: "After three years of regulation, the FSA is right to expect its regulatory standards to be in place across the whole market. These findings are a wake-up call to those brokers who are behind the pace.
"But the FSA also needs to make sure that it sets out its expectations clearly and unambiguously, which does not always happen. This is particularly important for small broking firms. Resources such as www.tcfinfo.co.uk are invaluable in distilling the FSA's requirements into a practical, usable format for brokers."
