Substandard subprime sales

The FSA has commenced enforcement proceedings against five firms operating in the sub-prime mortgage market. In thematic work covering 11 lenders, which together account for 50% of the sector by volume of sales, and 34 intermediaries, the FSA examined 485 customer files. In a third of cases the regulator found that intermediaries did not properly assess if the consumer was able to afford the mortgage. Brokers did not adequately address suitability in nearly half the files and in over half, customers had self-certified their income but it was often unclear why they had been so advised. A lot of customers were recommended to remortgage by advisers, thereby incurring early repayment charges, but the benefits were not evident.