Three brokers found to be mis-selling sub-prime mortgages
June 24, 2008
A recent report states that three brokers that were found to be mis-selling sub-prime mortgages – which are mortgages that are for those with poor credit history or no proof of income – have had to face action from the UK’s financial regulator, the Financial Services Authority recently, and one of the brokers that was found to be mis-selling these mortgage has been closed down by the FSA. This comes just months after the mortgage meltdown in the United States, which was sparked in the sub-prime sector and created a widespread global credit crunch.
Homebuyer Securities was the broker that was closed down as a result of mis-selling sub-prime mortgages. The other two brokers, which were the Loan Company, and Next Generation Mortgages, were not closed down but did face serious financial penalties after being found guilty of mis-selling these mortgages. Officials from the FSA claim that customers were being put at risk because the companies were failing to offer proper and adequate advice.
The Loan Company was fine just over £30,000 after it was found to be offering information that was not consistent, and for arranging loans without checking that the customer could actually afford to make the repayments. A fine of just over £10,000 was imposed on Next Generation Mortgages, and this was for failure to warn customers of the risks involved and failure to properly assess the needs of the customer.
An official from the Financial Services Authority stated: “Firms who do not comply with FSA standards taint the entire mortgage industry which is totally unacceptable. Any firms who place their customers at risk of receiving unsuitable advice through inadequate business processes can expect strong action from the FSA.”
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