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Mortgage advisers to face new FSA obligations

Mortgage advisers could be forced to shell out £450 to offer mortgage advice under new measures published by the Financial Services Authority.

The measures are detailed in a consultation paper and part of the city watchdog's Mortgage Market Review, which it launched last year. They propose to hold all mortgage advisers and those who arrange non-advised sales individually accountable for their business performance in a bid to ensure that customers in arrears are treated fairly. Mortgage advisers must also be able to demonstrate that they are fit and proper for their role.

Robert Sinclair, director of the Association of Mortgage Intermediaries, says: "If intermediaries are not already authorised with the FSA, it means they will have to pay £450 each to be regulated, which is significant. They will also have to have a records check and demonstrate that they are fit and proper, which means that they must be solvent and in a position to continue trading."

The new measures, which are also designed to help reduce mortgage fraud, call for lenders to refrain from adding early repayment charges on arrears charges and interest levied on those charges; to refrain from applying a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears; and to consider all options for borrowers, with repossessions viewed always as the last resort. The city watchdog also calls for lenders to record all arrears handling telephone calls and to keep all records for three years.

Lesley Titcomb, director responsible for the mortgage sector for the FSA, says: “The proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulties are treated fairly.

“Lenders need to be in no doubt of their obligations to customers who fall behind with payments and must realise that such circumstances are not an opportunity to create further profits.”  

The measures follow the FSA's decision to ban Bolton-based mortgage and insurance broker Riaz Ahmad. The FSA also fined him £5,000 and prohibited him from working in regulated financial services for failing to act with competence and capability, which included failing to have suitable compliance and risk management processes in place at 

Had it not been for Ahmad’s financial hardship, the FSA would have fined him £17,000.

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