FSA sets out plans to regulate individual brokers and ban self cert

FSA sets out plans to regulate individual brokers and ban self cert


Announcing major reforms for the mortgage market in its review discussion paper, the FSA stated that the new proposals reflected its changed approach to a more “intrusive and interventionist” style of regulation.

The key features of the review include banning self cert mortgages, imposing affordability tests for all mortgages and banning arrears charges when a borrower is already repaying.


The review also unveiled plans to individually regulate all mortgage brokers, as well as covering buy-to-let and second-charge lending under the FSA’s regulatory scope.


According to the discussion paper, by extending the Approved Persons regime the FSA has said that it hopes to improve standards among individual mortgage advisers, limit fraud and prohibit rogue individuals from the industry, although it admitted that these proposals would carry significant costs.


The FSA has not ruled out further change if the initial proposals do not have sufficient effect, including caps on loan-to-value, loan-to-income or debt-to-income.


Jon Pain, FSA managing director of supervision, said: “The mortgage market has seen extraordinary upheaval over the last 18 months and whilst it has worked well for the vast majority of borrowers, some have suffered great financial distress. We recognise that we need to bring about a step change in regulation and we need to act now to address the issues we have identified.”


The short term lender, Cheval, said that it is in favour of many of the proposals outlined by the FSA, with the lender claiming to have already moved away from self certification for its short term bridging loans.


Alan Margolis, chief executive officer of Cheval added that there was no conflict between undertaking proper due diligence on borrowers and the tight timescales that bridging loans are often subject to.


“Responsible short term lenders always ensure that their borrowers can both afford the monthly interest payments and have a realistic exit to repay their bridging loan.” Mr Margolis said. “To achieve this, only properly verified information will suffice, and this is even more important now given that self cert mortgages have not only disappeared from the market, but it seems that the FSA will effectively ban them in the future.”


The review paper is out for discussion until 30 January 2010, with the FSA actively seeking views from consumer groups and the industry. A feedback statement will be published in March. The regulator also noted that implementation will be phased, with the focus on speed for areas of high detriment, such as arrears.

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