Jan/100
Regulator cracks down on mortgage brokers
The FSA has fined three mortgage brokers for their inability to demonstrate they had recommended affordable mortgage contracts that met their clients’ needs.
Mohammad Rana, registered as Countrywide Management Consultancy and trading as Property Compass, has been fined 14,700 for failing to ensure that appropriate arrangements were in place for the supervision and monitoring of the firm’s sole adviser.
Peter Scott, trading as the Mortgage House, was fined 11,900 because the regulator found that he did not have a sufficiently clear understanding of the regulatory requirements imposed by the FSA. Chariot Mortgage Services Limited has been fined 10,500 for purporting to be whole of market, which was not actually the case.
Jan/100
£100,000 fine for North Wales mortgage broker
A MORTGAGE broker has been banned from trading and fined £100,000 for exposing 1,500 customers to the risk of bad mortgage advice. Rhyl-based Stephen Jones failed to make sure customers could afford the mortgages he had recommended, the Financial Services Authority said. Mr Jones was senior partner of Jones and Poole Independent Mortgage Specialists, in Edinburgh House, Clwyd Street.
The FSA alleged Mr Jones failed to control his business or make sure it met regulatory requirements, and said he did not treat customers fairly when recommending mortgages.
Mr Jones was yesterday slapped with a massive fine – the second largest of its kind ever imposed – after the FSA found he exposed about 1,500 customers to the risk of receiving unsuitable advice.
The regulator 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.
The regulator alleged that, before a visit from FSA staff, Mr Jones arranged for customers to sign and back-date documents for completed sales, so it would look as if he had created sales documents at the time.
He was also accused of providing a lender with false income information to support his own mortgage application.
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. But 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 Poole was fined for failing to record whether he had assessed clients’ ability to afford a mortgage. He also failed to implement changes recommended by a compliance consultant.
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… I was never dishonest. “I have always worked ethically and have always looked at the affordability of mortgages.”
The FSA said it has removed the partnership’s authorisation, but Mr Poole had obtained new authorisation to carry on as a sole trader. Mr Jones said he was no longer in the mortgage industry, and had set up a new venture involving a care home.
Jan/100
Mortgage broker fined for failing customers
BOURNEMOUTH mortgage broker Leybridge Ltd has been fined £24,000 and censured by the Financial Services Authority (FSA) for keeping inadequate records and failing to ensure it provided suitable advice to its customers.
According to the FSA the Bath Road based business operation exposed 425 customers to the risk of being mis-sold a mortgage during the period between October 2004 (when the company was first established) and February 2008.
However, the FSA has waived the fine in order to ensure that Leybridge can afford to compensate customers who might have been disadvantaged.
Explaining the censure, the FSA says Leybridge failed to ensure that it made and retained adequate records of its customers’ personal and financial information in a number of key areas and widespread record keeping failures led to the firm being unable to demonstrate that the advice given to customers was suitable.
The firm was also found to have employed inadequate file checking systems whereby sales advisers and mortgage processors would check each file for the existence of requisite documentation, not the standard of its completion.
Directors would then check only a sample of files and did not do so on a regular or adequate basis.
In its report the FSA said that customers who are employed and can prove their income most commonly take out full status mortgages.
However, Leybridge sometimes recommended self certification mortgages to such customers. In these circumstances Leybridge often recorded no explanation as to why this type of mortgage was recommended.
When Leybridge issued a letter of suitability to its customers detailing the reasons why a particular mortgage product had been recommended the reasons given were often generic and did not reflect the information contained within the fact find.
Margaret Cole, FSA Director of Enforcement, said: “Leybridge’s record keeping was so poor that they could not demonstrate that the sales of mortgages were suitable and had no way of proving to us that the firm was treating its customers fairly.”
In waiving the fine, the FSA said it had taken into account that Leybridge had been open and cooperated fully with the investigation and had accepted that there were management and control failures during the Relevant Period.
Leybridge also agreed to remedial action in the form of a customer contact exercise and has committed to compensate those who may have suffered any detriment as a result of Leybridge’s failings.
Managing director David Dixey said that many of the aspects identified by the FSA had occurred during the early days when the company was first started.
“We have continued to learn as the business has grown and put in place measures to overcome the issues identified.” During the period we rejected 20,000 mortgage applications where people could not fulfil the conditions which shows how selective our process is.”
Leybridge is a limited company with three directors. During the relevant period, Leybridge employed three salespersons who between them advised on 425 mortgage contracts.
Jan/100
FSA fines three mortgage brokers
Three seperate mortgage broker firms have been fined a total of £37,100 by the Financial Services Authority (FSA) for inadequate sales procedures. Mohammad Rana, based in Marston in Oxford, registered as Countrywide Management Consultancy and trading as Property Compass, was fined £14,700. Peter Scott, based in Horsham, West Sussex, trading as the Mortgage House was fined £11,900 and Chariot Mortgage Services Limited, based in Sale in Cheshire, was fined £10,500. However, the FSA said that had the brokers not agreed to settle early, they would have not qualified for a 30 per cent discount. This would have meant that their fines would have been £21,000, £17,000 and £15,000 respectively.
The FSA found all three mortgage brokers failed to gather adequate customer information, including personal and financial information, to demonstrate the suitability of their advice.
Countrywide also failed to ensure appropriate arrangements were in place for the supervision and monitoring of its one adviser, according to the regulator.
The FSA also ruled Mortgage House’s Scott did not have a sufficiently clear understanding of the regulatory requirements imposed by the FSA aimed at ensuring he gave affordable and suitable advice.
Chariot failed to communicate information to its clients in a way that was clear, fair and not misleading in that it held itself out as sourcing contracts from the whole of the market which in practice was not the case, the regulator ruled.
All three mortgage brokers are now required to undertake reviews of past business to establish whether, behind the process failures, any customers received unsuitable advice, and to help put things right.
Jonathan Phelan, head of retail enforcement for the FSA, said: “It is deeply disappointing to find that mortgage brokers visited by the FSA are falling short of basic standards aimed at ensuring that they treat their customers fairly.
“We will continue to take disciplinary action against mortgage brokers who cannot demonstrate that the mortgage contracts they recommend are affordable.”
Jan/100
£30,000 fine for mortgage broker
A mortgage broker from the UK has been fined a massive £30,000 by authorities after being accused of giving advice that put consumers at risk during the ongoing global credit crunch and financial crisis. William John Evans, along with a fellow director from Abbey Mortgages, were fined by the Financial Services Authority earlier this month. The FSA is exercising an ongoing crackdown on unscrupulous lenders and brokers given the current financial climate and the state of the housing and mortgage markets.
Having analysed a sample of around 113 cases between January of 2006 and April of 2008 officials from the UK’s financial regulator found that Abbey Mortgages Ltd had not met the standard required. Mr Evans was found to have carried out inadequate checks with regards to whether the customers were earning the income that they claimed to earn, which led to customers taking on mortgages that they could not afford repayments on.
The standard FSA fine is £50,000 but the directors were unable to afford this, and instead opted for the high cost review instead. The two directors avoided a fine of £42,000 each by agreeing to pay the fine as quickly as possible.
Mr Evans stated: “The cases they were concerned about we have to pay for an independent company to do a full review to make sure there was no detriment to our clients. This couldn’t have come at a worse time with the market in the state it is. We’re not short of enquiries, we’re just short of mortgages for them.”
An FSA official said: “Obtaining and clearly recording the right information from customers is not just about process. It is an important step in preventing financial crime and giving customers the right advice and treating them fairly. This is always important but is especially important in difficult economic times.”
Jan/100
Mortgage broker banned and fined
A mortgage broker has been banned and fined £100,000 by the Financial Services Authority for being involved in submitting false applications. The regulator said the fine handed out to Abiola Agbalaya was supposed to be a deterrent against mortgage fraud. The banned broker was the sole controller of Herald Finance Ltd in south London. The FSA has banned more than 30 brokers in the past two years during a crackdown on mortgage fraud.
‘Serious and blatant’
Mr Agbalaya obtained several mortgages after submitting applications that significantly overstated the profits of Herald and his own income, the FSA said. The regulator also banned Grace Olatunji, who worked as a mortgage consultant for Herald, for submitting applications based on false income information. Margaret Cole, director of enforcement at the FSA, described the actions of the duo as “serious and blatant”. “Perpetrators of fraud will increasingly find themselves facing bans and significant fines as we continue our work in this area,” she said.
Jan/100
FSA Mortgage Broker Crackdown
The Financial Services Authority has today announced it is embarking on a crackdown of unscrupulous mortgage lenders and lending practices which have been uncovered in the industry, particularly in selling heavy mortgages to those that can least afford them.
Speaking today on the state of the mortgage industry they said that it would begin a significant clamp down on the dishonest brokers currently operating within regulated markets, particularly in light of a total of four in depth investigations into brokers already this year, with 65 additional firms in line for further scrutiny.
The FSA alleges problems within self certification mortgages which see borrowers actively encouraged to inflate their income and earning potential to obtain more generous mortgages.
The Financial Services Authority has today urged mortgage brokers to carefully consider self certificated earnings figures from customers, and indeed to consider reasonableness of mortgage burdens as a whole when deciding whether or not to sell to prospective customers in order to avoid falling foul of industry regulations.
Seven additional brokers are currently being subject to investigations by the FSA, with the potential for charges of fraud to be levied against those falling below the strict requirements for selling mortgages imposed by statute and by the industry regulators. It is thought that the FSA may continue investigations over the coming twelve months in order to avoid damaging the reputation of the industry and having an adverse impact on the customers to which they relate.
Jan/100
Bristol’s rogue mortgage brokers fined
Rogue mortgage brokers are being unmasked by the City watchdog as the slump reveals the sins of the property boom. The number of brokers being targeted by the City watchdog has rocketed over the past three years and the flow of fines for mis-selling and malpractice is expected to continue.
So far in 2008, more than £20.5 million worth of fines has been dished out by the Financial Services Authority (FSA) of which over £1.5 million have been slapped on some 15 mortgage brokers who have been found guilty of misconduct.
The reasons cited for the brokers’ fines have ranged from giving ‘unsuitable advice’ to ’submitting false mortgage applications’ to even ‘lacking competence and capability’.
The selling of mortgage products only came under the watchdog’s eye four years ago in October 2004.
Jan/100
Mortgage brokers fined £17,500
A NOTTINGHAM mortgage broking firm has been fined £17,500 because it failed to provide suitable advice.
Gillen Farrelly Independent Advisers Limited exposed more than 80 customers to the risk of being sold an unsuitable self-certified mortgage, say the Financial Services Authority (FSA). The FSA said that between January 2006 and April 2008 the Forest Fields firm failed to make appropriate inquiries about customers’ income, expenditure, credit history and debt position.
The authority also said the company failed to carry out straightforward checks that increased the risk of being used by third parties to commit financial crime.
The company no longer sells self certification mortgages and agreed to settle at an early stage of the FSA’s investigation, so qualified for a 30% reduction in penalty.
The company refused to comment when contacted by the Evening Post.
Jan/101
Mortgage lender fined over reposession policy
One of the UK’s biggest specialist mortgage lenders has been ordered to pay a record £10.5 million for treating struggling borrowers unfairly and being too ‘trigger-happy’ with repossessions.
GMAC-RFC, which was a top 10 lender before the credit crunch hit, has been fined £2.8 million by the Financial Services Authority (FSA) and ordered to pay over redress of £7.7 million plus interest to more than 46,000 mortgage customers.
An investigation found that the specialist lender, which mainly dealt with sub-prime, buy-to-let and self-cert mortgages, hit struggling borrowers with “excessive and unfair” charges. It was also found to have launched repossession proceedings before “fully considering the alternatives”. This is the first time a lender has been fined over the way it treats borrowers struggling with payments. Complaints about arrears handling increased 41% to 39,181 in the first six months of 2009, according to the FSA.
The fine follows the FSA publishing its mortgage market review, in which it proposed tougher affordability checks and the end of self-cert mortgages. Margaret Cole, director of enforcement and financial crime at the FSA, says GMAC-RFC’s fine should act as a deterrent to other lenders. In a written statement, the lender has apologised to affected customers.
It says: “While our arrears charges were in line with the market, in hindsight we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required.”
What affected customers should do:
Over 46,000 GMAC-RFC mortgage customers could now be due redress from a compensation pot of up to £7.7 million plus interest. This applies to customers who were hit with specific arrears charges between 31 October 2004 and 30 November 2008.
Specifically, the FSA fine and redress order relates to:
* Excessive and unfair charges for customers
* Proposed repayment plans that did not always consider customers’ circumstances
* Repossession proceedings that were issued without all the alternatives being fully considered. GMAC-RFC’s staff were also found to have insufficient training in how to deal with arrears cases.
Customers who were hit with arrears charges for failing to pay their monthly mortgage payment by direct debit are set to receive an average refund of £117.
Borrowers who paid early repayment charges applied to arrears fees and charges could get an average refund of £14. And average refunds of £45 could be available in cases where the solicitor’s instruction fee their paid was more than the actual cost.
GMAC-RFC has already set up a redress system, and says it will write to all affected customers with more details.
Following this, existing customers of GMAC-RFC will receive an automatic re-crediting of the charges plus interest to their mortgage account.
Past customers, who have now redeemed their mortgages with GMAC-RFC, should also receive a letter. This will, however, be sent to their last known address.
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