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Part 2 - City watchdog probes money lenders over high risk mortgages
An FSA spokesperson said, "We want to assess whether mortgage advisers are taking reasonable steps to ensure that personal recommendations to enter into sub prime mortgage products are appropriate to the needs and circumstances of consumers. We also want to ensure that mortgage advisers are gathering all information likely to be relevant for the purpose of establishing the suitability of these products."
- ReMortgaging is it still worthwhile
- Rate Tart is the name coined by the mortgage industry for borrowers who switch mortgage lenders chasing lower interest rates. Call them Rate Tarts if must, but they'll be the richer for it!
- Mortgages. Exit fees to be capped.
- After years of lenders having a free hand to increase exit charges, the FSA steps in to restore fairness for consumers. This article explains.
- Mortgages. The pitfall of Interest Only mortgages.
- Interest Only mortgages have become increasingly popular. Why, and what are the concerns?
- Mortgages. Big changes in the buying and selling of houses.
- In mid summer 2007 everyone who wants to sell a property will have to prepare a Home Information Packs before they put it on the market. This article explains what the Packs will have to include what they'll cost - and whether we expect them to work!
- Mortgages. Short term advice
- There are some new lower rate “lifetime” home loans coming onto the market. How do they fare against the even lower rate “shop around” options?
- HIP's – the full story
- Ready, steady, go! With just three months to sell your home using the forthcoming and compulsory information pack, you need to get your act together. Here we face the facts.
Recently, the authority did some digging with respect to the area of subprime borrowers. It examined 31 small mortgage firms and 210 customers who had taken out loans with those companies. As a result, the FSA revealed that 60% of the firms had not obtained enough information from the customer to determine whether they could adequately pay back their mortgage and in 57% of cases, the sale involved consolidation of a customer's existing debts.
Then there was also the 67% of cases where firms could not show that they had taken into account the customer's previous situation with respect to creditors and debts. That is not to mention the fact that most (80%) couldn't justify how the mortgage product could meet the customer's needs.
In fact, the FSA had three cases where brokers appear to have helped customers get a mortgage that they could not afford by inflating the applicant's income on the application form. These firms have been referred to enforcement agencies for further investigation.
It acts as a strong reminder for brokers to keep a checklist for collecting the right information for mortgage applicants. That includes credit history, previous debts, existing mortgage arrangements and income and expenditure. These days most mortgage deals are sold through brokers so they have an important part to play.
The FSA says it will follow this issue up and further assess sales with these sorts of firms to make sure they have changed their procedures for gathering information. This will start with a review of mortgage brokers that are prepared to sell customers home loans who have a poor credit rating. The investigation begins this summer.
Your home may be repossessed if you do not keep up your repayments on a mortgage or any debt secured on it. Security by way of a charge on your home may be required.