Earlier this month the Financial Services Authority (FSA) reported that five mortgage intermediary firms were facing enforcement action following its review into the non-conforming sector. The regulator reviewed 34 intermediary firms covering 485 customer files. Large numbers of the files contained both inadequate assessments of consumers’ affordability and suitability plus a lack of written evidence to justify the recommendations that had been made.
Mike While, director of Insynergi (UK) Ltd, commented: “It is vitally important that all mortgage intermediary firms take on board the results of the FSA’s non-conforming work and review their own practices in line with the examples of good and poor practice published.
“Advisers must be aware of their own responsibilities, as opposed to those of the lender. While the lender has a responsibility to ensure ‘responsible lending’; the adviser is expected to know their client, give suitable advice and demonstrate affordability.
“Part of the danger is to think that collecting enough information to satisfy the lender’s requirements is enough for a compliant sale. This is not the case and those intermediaries who only collect the minimum of information necessary to progress the case with a lender could well fall foul of the regulator leaving themselves open to possible enforcement action, complaints or allegations of mortgage fraud.
“Advisers must always conduct the necessary steps to ensure a compliant sale. This means knowing their customer, assessing their needs, and validating their income and affordability. They must also ensure they collect all the evidence they need to satisfy themselves and the regulator before making the recommendation – this is why robust record-keeping is a must in today’s regulated environment.
“There is a raft of information available and advisers can always seek help from professional compliance experts to ensure their practices are robust. The regulator has already shown it will take action against those firms that have not reached its standards – all firms are advised to ensure they are not the next to be dealing with enforcement action.”
