Mortgage advisers have done little to improve their affordability advice processes since last year, according to a new FSA review.
As part of the FSA’s investigation into affordability, arrears and repossessions handling, the FSA also warned lenders to ensure they treat customers fairly.
As part of the overall investigation, the FSA assessed 250 firms offering mortgage advice. Its review was a follow up to the Quality of Advice project published last year, which found major weaknesses in firms’ advice processes.
The FSA says it found little evidence of improvements in these areas in its second review and its findings were 'disappointing'.
The review found three quarters of firms involved in a mystery shopping exercise did not adequately assess affordability, because they did not calculate customers’ outgoings and expenditure.
Many firms also failed to consider affordability in cases where a mortgage term would run past the client’s retirement age.
Following the investigation, seven small mortgage advisers have been referred to enforcement and 23 have been asked to review their client files.
The FSA says all firms offering mortgage advice must significantly improve their methods for establishing affordability, and put a particular emphasis on taking a customer’s existing outgoings into account.
The FSA has also criticised specialist lenders for failing to take into account their borrowers’ individual circumstances when handling arrears. They were accused of taking court action too readily and had poor training and competency arrangements.
Lesley Titcombe, FSA director for the mortgage sector, says: “As our data shows in these current market conditions more people are struggling to meet their mortgage payments and it is vital that firms treat them fairly.
“This means paying attention to their individual circumstances and not repossessing their homes when there may be an alternative solution. Repossession has to be the last resort.”
The Intermediary Mortgage Lenders Association (IMLA) has refuted the claims that specialist lenders treat customers badly.
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