Jan/100
Ex-mortgage broker fined £100,000
A former mortgage broker who ran an office in Chester was yesterday fined £100,000 by a financial watchdog.
The Financial Services Authority (FSA) has banned Stephen Jones and hit him with the massive fine – the second largest ever – after finding he had exposed about 1,500 customers to the risk of receiving unsuitable advice.
The FSA has also fined junior partner Simon Poole, who ran the partnership’s office in Chester, £7,000 for exposing 750 clients to the risk of purchasing unsuitable mortgages.
Mr Jones, senior partner of Jones & Poole Independent Mortgage Specialists, failed to control his business effectively or to make sure that it met regulatory requirements, and did not treat customers fairly when recommending mortgage contracts, alleged the FSA.
But Mr Jones told the Daily Post he rejected the allegations of dishonesty and fraud, and was seeking legal advice with a view to challenging the FSA’s ruling.
The partnership was formed in 2001/02 and became authorised to carry on regulated activities in relation to regulated mortgage contracts on October 31, 2004.
It traded from Edinburgh House, Clwyd Street, Rhyl, and from the Chester office. The FSA has removed the partner- ship’s authorisation, but Mr Poole has obtained new authorisation to carry on as a sole trader.
The FSA said the £100,000 fine was the second biggest imposed on a mortgage broker since it took over mortgage regulation nearly four years ago. It alleged that, before a visit from FSA staff, Mr Jones arranged for customers to sign and backdate retrospective documents for completed sales so that it would appear he had created contemporaneous sales documents. He also provided a lender with false income information to support his own mortgage application. Mr Poole was fined for failing to record whether he had assessed clients’ ability to afford a mort- gage. He also failed to implement changes recommended by a compliance consultant.
The partnership operated in practice as two separate businesses with each partner responsible for his own clients, sales and compliance arrangements and with the two partners having only very limited contact with each other.
Jonathan Phelan, the FSA’s head of retail enforcement, said: “Mr Jones and Mr Poole exposed more than 2,000 of the partnership’s customers to the risk of receiving unsuitable advice and losing money.
“Mr Jones’s fraudulent mortgage application and his dishonesty in attempting to cover up regulatory failings were completely unacceptable warranting a ban and a large financial penalty.
“Mr Poole’s failings were of a lesser order and although they were deserving of a fine he has not been banned.”
Mr Phelan added: “It was in effect a dysfunctional partnership. It is important that partnerships which carry on regulated financial services business are organised so they can be controlled as a single business with clear lines of responsibility and accountability.”
Mr Poole agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount under the FSA’s executive settlement procedure. Otherwise he would have paid £10,000.
But Mr Jones said he had not heard from the FSA since its enquiries last year and yesterday’s news of the £100,000 fine had come as a complete shock.
He said: “I will be taking legal advice on this because the FSA has implied dishonesty and fraud.”
Jan/100
Mortgage brokers fined
The Financial Services Authority (FSA) has taken action against three mortgage brokers that may have resulted in clients taking out home loans that were not suitable for them. Lawrence Scoffield Mortgages of Ripon and Council Homebuyers (Midlands and North) have both been fined £10,500 each by the financial services watchdog.
The FSA said that neither firm exercised adequate management and control over their sales processes. The watchdog also publicly censured another firm, Mortgage Network Solutions of Manchester, which had failed to make and retain proper records concerning the needs and circumstances of customers, and which had also failed to maintain adequate records of its procedures for training and competence.
Jonathan Phelan is head of retail enforcement at the FSA; he said: “It is essential that firms implement and maintain robust processes to ensure they recommend suitable mortgage contracts and treat their customers fairly. Poor processes of the kind we identified in these mortgage brokers meant there was a risk of unsuitable mortgage contracts being recommended, either because the advisers were not appropriately qualified and supervised or because the assessments of the customers’ needs and circumstances were incomplete or poorly documented.”
Work carried out by the FSA in 2006 on the quality of mortgage advice unveiled the problems. Firms of various sizes totalling 252 were looked at, with 78 being visited and mystery shopping undertaken at 99. Things looked at were the way advisers considered the needs of customers, how their ability to afford a loan was assessed, and the quality of recommendations. The FSA also monitored after-sales care and the level of management controls that were in place. In general terms the watchdog found that there was room for improvement among firms in all steps of the advice process.
The three firms against whom action was taken will have to review all past business. All three firms agreed to settle at an early stage, otherwise the two firms that were fined would have ended up with a fine of £15,000.
Jan/100
Broker banned and fined by regulator
Over recent years mortgage fraud has become a big problem in the UK as well as in other countries and the UK’s financial regulator, the Financial Services Authority, has been clamping down on this sort of activity through taking various measures including hefty fines and bans for those industry officials that are found to be involved in mortgage related fraud.
The regulator has recently banned one mortgage broker and handed down a hefty fine for engaging in mortgage related fraud. The London broker, Grace Nmadibechi Ada Ukala, has been banned from operating by the FSA and has been fined an enormous £70,000 for her part in the submission of misleading and false mortgage applications.
The broker was the director of Goldsparkle Consulting Services Limited and had been approved by the FSA. According to reports she submitted five mortgage applications for herself, but put in dishonest information about income and employment. The broker was also found to have hidden information about the firm’s finances from HM Revenue and Customs. The fine could have been for much more, but as she opted to settle early it was reduced.
An FSA official said: “This fine, which would have been £100,000 had Ukala not settled early, is aimed at deterring approved persons from getting involved in mortgage fraud. Her earnings, as stated in the mortgage applications, were considerably higher than the income she declared to HMRC. By knowingly submitting false and misleading mortgage applications, Ukala acted in a totally unacceptable fashion.”
She added: “Our work on mortgage fraud continues as a priority in our campaign against financial crime. We have banned more than 60 mortgage brokers over the last three years and we will continue to ban such people to reinforce the message that knowingly giving false and misleading information is dishonest and poses a serious risk to prospective lenders. We will continue to ban individuals who demonstrate a lack of integrity.”
Jan/100
Broker banned and fined by regulator
Over recent years mortgage fraud has become a big problem in the UK as well as in other countries and the UK’s financial regulator, the Financial Services Authority, has been clamping down on this sort of activity through taking various measures including hefty fines and bans for those industry officials that are found to be involved in mortgage related fraud.
The regulator has recently banned one mortgage broker and handed down a hefty fine for engaging in mortgage related fraud. The London broker, Grace Nmadibechi Ada Ukala, has been banned from operating by the FSA and has been fined an enormous £70,000 for her part in the submission of misleading and false mortgage applications.
The broker was the director of Goldsparkle Consulting Services Limited and had been approved by the FSA. According to reports she submitted five mortgage applications for herself, but put in dishonest information about income and employment. The broker was also found to have hidden information about the firm’s finances from HM Revenue and Customs. The fine could have been for much more, but as she opted to settle early it was reduced.
An FSA official said: “This fine, which would have been £100,000 had Ukala not settled early, is aimed at deterring approved persons from getting involved in mortgage fraud. Her earnings, as stated in the mortgage applications, were considerably higher than the income she declared to HMRC. By knowingly submitting false and misleading mortgage applications, Ukala acted in a totally unacceptable fashion.”
She added: “Our work on mortgage fraud continues as a priority in our campaign against financial crime. We have banned more than 60 mortgage brokers over the last three years and we will continue to ban such people to reinforce the message that knowingly giving false and misleading information is dishonest and poses a serious risk to prospective lenders. We will continue to ban individuals who demonstrate a lack of integrity.”
Jan/100
So how do you go about making a claim?
Recently several struggling home owners have made successful claims against their lender or broker after they were able to prove that their mortgage was mis-sold to them. In each of the instances they have been able to reclaim the money that they were in arrears by and additional costs, as they were able to prove that they should not have been advised to take out the mortgage in the first instance.
Identifying that a mortgage has been mis-sold can be difficult, but the successful home owners so far have been able to prove in each of the incidents that the advice offered to them was proven not to have been “suitable for that consumer”, and records were not made or retained – and this breaks FSA rules.
In the last financial year alone the FOS received more than 7,000 mortgage complaints from consumers (excluding mortgage endowment complaints), and currently upholds 41% of all mortgage complaints.
Stephen Dargavel, director of Badlender.co.uk said: “The justice that some recent home owners have gained by challenging their lenders and brokers should serve as a warning sign. It should also act as a beacon of hope for those who genuinely believe that they may have been mis-sold a mortgage. There is something that can be done, and people do not need to suffer in silence.”
However, taking cases to a broker/lender or the FOS can be a complicated process, and consumers will need all relevant documentation to support any mis-selling complaint that they want to put forward.
Jan/100
Were you mis-sold your mortgage?
As many as 371,000 home owners say they were given bad advice or mis-sold their mortgage – and many may have a claim against their lender or broker.
Under FSA rules if the advice given breached the rulebook for mortgage advisers – “Mortgage and Home Finance: Conduct of Business” then borrowers struggling to pay their mortgage could take their case to the Financial Ombudsman Service (FOS).
According to mortgage claims referral service badlender.co.uk, 161,500 home owners don’t think they had the right advice from their lender or broker when taking out their mortgage, and 209,500 home owners think that they may have been mis-sold their mortgage.
Jan/100
Mortgage mis-selling claims set to rise, says new firm
More than 371,000 home owners believe they may have been given poor advice or been mis-sold their mortgage after purchasing property or remortgaging during the property boom. This is according to research undertaken by Opinium Research on behalf of new mortgage claims management firm badlender.com.
This figure breaks down to 161,500 home owners who don’t think they had the right advice from their lender or broker when taking out their mortgage, and 209,500 home owners think they may have even been mis-sold their mortgage.
In the last financial year the Financial Ombudsman Service has received more than 7,000 mortgage complaints from consumers (excluding mortgage endowment complaints), and currently upholds 41% of all mortgage complaints.
Badlender.co.uk forecasts that the number of home owners struggling with repayments could still rise, and more home owners could come forward with cases of mis-selling against their broker or lender.
Stephen Dargavel, Director of Badlender.co.uk, believes more home owners could come forward with cases of mis-selling. He said: “Whilst there are many reputable and long standing brokers and lenders in the mortgage market, we believe there have been some who are responsible for mis-selling mortgages to home owners during the ‘boom’ of the property years.”
Taking cases to a broker/lender or the Financial Ombudsman Service can be a complicated process, and consumers will need all relevant documentation to support any mis-selling complaint that they want to put forward.
Badlender.co.uk has developed a questionnaire consisting of 106 questions that will help consumers identify if their mortgage was mis-sold to them. If cases are identified as potentially successful, home owners are offered the services of legal 500 law firm property specialists Grange Wintringham, who will help them to pursue a complaint against their broker or lender.
Consumers will be charged a nominal £40 fee to complete the questionnaire, and 15% of the final settlement will be deducted to cover legal costs. Consumers can also appoint their own solicitors or lodge a complaint themselves.
Dargavel concluded: “We are currently representing consumers who are heavily in arrears, because the mortgage that they were advised to take out was simply too big for them to handle, and meet the monthly repayments. Default charges can be levied on home owners anywhere between £25 and £115, adding even greater financial strain.”
Jan/100
Watchdog acts on mortgage mis-selling
The Financial Services Authority has cracked down on a number of unscrupulous mortgage brokers after it uncovered “serious failings” in the advice they were giving to borrowers.
Seventeen brokers face legal action, four have been suspended and a further 65 must conduct costly reviews after the City watchdog found that advisers were arranging self-certification mortgages despite doubts over the accuracy of borrowers’ details.
Six of the seven that were referred immediately to the FSA’s enforcement division were censured for mis-selling self-certified loans, while another was condemned for granting “unaffordable” mortgages to customers.
Self-certification loans, most commonly sold to the self-employed, do not require proof of income. Brokers have been criticised for misusing the rules to boost the amount customers can borrow, particularly as house prices rise.
Some brokers are understood to have sold more costly self-certification loans to borrowers who are not self-employed to enable them to buy more expensive properties.
The FSA’s move comes as borrowers in the UK are becoming increasingly overstretched. Many thousands of sub-prime borrowers are facing repossession as borrowing rates rise and lending criteria are tightened.
The FSA revealed last week that it had fined two brokers and shut one down for mis-selling sub-prime deals. It said that there was “some cross-over” between self-certification and sub-prime loans because self-certification deals often help self-employed borrowers with chequered credit histories to obtain a mortgage.
Melanie Bien, director at Savills Private Finance, the mortgage broker, said: “The sale of self-cert mortgages has come in for criticism recently but, done properly, it can help clients with income streams that are not easily verifiable. The biggest potential pitfall is the risk of brokers encouraging clients to overstate their earnings to achieve the loan amount required – this is potential fraud.”
Lenders that specialise in self-certification, including Platform, Britannia Building Society’s specialist arm, and BM Solutions, owned by HBOS, have been scaling back their self-certification ranges in the wake of the credit crunch. As with sub-prime deals, self-certification is seen as riskier than traditional lending. At the start of the year, self-employed borrowers could find a deal for up to 95 per cent of the value of their property. The limit has since fallen to 90 per cent. Interest rates are also higher than standard to cover the extra risk.
Stephen Bland, of the Financial Services Authority, said: “There is still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry”.
“We found some willing to offer mortgages they know to be unaffordable and to accept self-cert business even when they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with treating customers fairly.”
However, the Council of Mortgage Lenders (CML) criticised the FSA for being unclear and ambiguous about its expectations of brokers.
Michael Coogan, director-general of the CML, said: “These findings are a wake-up call to those brokers who are behind the pace. The FSA also needs to make sure that it sets out its expectations clearly and unambiguously, which does not always happen.”
The FSA investigated 345 brokers during the inquiry and it will start another six-month review of mortgage advice in January.
Jan/100
Key repossession ruling opens door to mortgage mis-selling complaints
A remarkable ombudsman victory for a householder who had his home repossessed after being mis-sold a hefty mortgage, could set a precedent, preventing others from losing their properties as the recession bites, lawyers say.
Many borrowers who face handing back the keys to their homes could be helped by rules covering “suitable advice”.
Andrew Brown (not his real name) struggled to repay his mortgage but subsequently took his mis-selling case to the Financial Ombudsman Service, and has now won. Despite turning to the FOS late on and being repossessed, he will receive compensation - while other borrowers who begin cases at an earlier stage than he did might well be able to save their homes too.
A housing association tenant, Brown had the valuable promise of a rent fixed for life. However, a mortgage adviser persuaded him to buy the property and failed to consider “what would happen when the attractive discounted rate [set up on that mortgage] ended”, according to an FOS spokeswoman.
Brown was repossessed and had to move; he then lodged a complaint with his mortgage adviser and ultimately brought the case to the FOS.
Industry specialists believe more claims of this kind are now likely to emerge.
There appear to be many cases of people being mis-sold mortgages they could not afford.
A Citizens Advice report entitled Set Up to Fail, on the sub-prime lending market in 2007, found the charity’s repossession clients had often found themselves with “inappropriate and unaffordable” mortgages and secured loans, and that people buying council houses received “particularly poor advice”.
One case it highlighted concerned a couple with a disabled child in south-east Wales who were persuaded to take a second mortgage on their home. The loan wiped out their equity and meant £1,300 - 87% - of their £1,500 monthly income went on mortgage repayments.
The CML accepts the rulebook can be invoked by consumers. “The MCOB rules are there for a reason: to protect consumers,” says spokeswoman Sue Anderson.
In 2007, Cash highlighted how cold-callers were using dodgy selling tactics to convince social housing tenants to exercise their “right to buy” and saddle these low-income homes with inappropriate mortgages.
Although the ombudsman found in Brown’s favour, the issue remains complicated. The FOS is charged with restoring people, as far as possible, to the situation they would otherwise have been in - and that is not straightforward in circumstances such as these.
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