FSA acts on sub-prime mortgage brokers

by Gill Montia

Story link: FSA acts on sub-prime mortgage brokers

The Financial Services Authority (FSA) has closed down one mortgage broker and fined two others, for mis-selling sub-prime mortgages.

The FSA took the action against the firms after investigating the sale of sub-prime mortgages earlier this year.

Homebuyer Securities, which is based in Redditch, Worcestershire, has been closed because its mortgage advisers were unqualified.

The Loan Company, based in Sandbach in Cheshire, has been fined £31,500 for giving inconsistent information to customers and for failing to ascertain whether the mortgages they sold were affordable.

Cardiff-based Next Generation Mortgages has been fined £10,500 because it had failed to assess customers thoroughly and did not explain the risks attached to certain mortgage products.

All three firms are now scrutinising their records to check whether any customers have suffered actual financial loss as a result of their advice.

The FSA has spent over a year investigating the way in which sub-prime mortgages are sold in the UK.

Instances of people being offered home loans they might not be able to afford came to light and Margaret Cole of the FSA has warned that “Any firms who place their customers at risk of receiving unsuitable advice through inadequate business processes can expect strong action from the FSA.”

She adds that: “Firms who do not comply with FSA standards taint the entire mortgage industry, which is totally unacceptable.”