Governance

FSA presents long overdue mortgage shakeup

 Print E-mail
Governance
Written by Gary Howes   
Monday, 19 October 2009

Which? asks why today's recommendations where not introduced earlier.

 

The Financial Services Authority (FSA) has today announced long anticipated proposals aimed at transforming the mortgage market.

The changes are a response to years of 'reckless' lending that saw mortgages being given to consumers who were simply unable to afford them.

This lending lead, infamously, to the 'credit crunch' after more and more mortgage holders defaulted on their loans.

One of the more publicised recommendations coming from the FSA today is that lenders question applicants on their drinking habits with the view to determining their level of expendable income.

This will form part of an affordability test that makes lenders ultimately responsible for assessing a consumer’s ability to pay.

Self-certified mortgages are also likely to be banned as applicants will have to go to further lengths to verify their income.

Chief executive at consumer watchdog Which?, Peter Vicary-Smith says:

“We’re pleased that the FSA is looking to take a more robust approach to regulating the mortgage market, although we would like to see tougher measures such as a ban on mortgages over 100% and the naming of lenders that mistreat their customers.

“Mortgage providers are already responsible for assessing affordability, so why is the FSA only getting tough on it now? Many borrowers are suffering the consequences of irresponsible lending.”

 

Core recommendations:


• Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay;
• Banning ‘self-cert’ mortgages through required verification of borrowers’ income;
• Banning the sale of products which contain certain ‘toxic combinations’ of characteristics that put borrowers at risk;
• Banning arrears charges when a borrower is already repaying and ensuring firms do not profit from people in arrears;
• Requiring all mortgage advisers to be personally accountable to the FSA;
• Calling for the FSA’s scope to cover buy-to-let and all lending secured on a home.

 
Share this article:
Digg It! Digg it!   Post to del.icio.us del.icio.us   Seed in Newsvine Newsvine   Post to reddit Reddit   Facebook  Stumble It! Stumble It!  

Subscribe to our weekly newsletter for top jobs, news, blogs and more

Get the latest senior finance job roles, news, blogs, features, industry moves and opinion delivered directly to your inbox every week. Sign up here .