A number of mortgage lenders are offering home buyers loans that they are unable to repay, according to the Financial Services Authority (FSA) and thereby creating the risk of repossession.
The FSA report found that, while many mortgage lenders are meeting the required standards of fairness, other brokers are negligent and non-compliant, and are lending irresponsibly.
The FSA found a number of brokers who were prepared to offer mortgages deals that the borrower is unlikely to be able to pay back, thereby increasing the risk that the house will be repossessed.
According to the finance watchdog, several mortgage lenders are operating well below the required standards, with management of these firms failing to ensure that they are treating borrowers fairly.
After four separate reviews if 345 mortgage lenders in the UK this year, the FSA has decided to refer seven of these firms to its Enforcement department, while the watchdog said it had considered other lenders for referral.
In addition to the seven firms who will face action, 65 mortgage lenders have been ordered to review past deals, or hire specialists to carry out the work.
According to the FSA’s Stephen Bland:
“During the reviews we saw a number of good brokers who are meeting the required standards and they are being undermined by the negligence or wilful non-compliance of others.”
Such irresponsible lending is likely to result in borrowers falling behind on mortgage payments, and even facing the risk of repossession in some cases.