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Name and shame the lenders that have not been acting responsibly and treating their customers fairly, that’s what I say.

Today the FSA reiterated its call for lenders to treat customers fairly and lend responsibly, particularly in today’s challenging market conditions.

After a review of 18 firms, it revealed that some lenders were not checking customers’ incomes in cases where they should have had reason to doubt the amount declared.

But, to me, more worrying is that the review has also brought to light the fact that lending policies operated by mortgage lenders are vague, particularly on the factors used to assess customers ability to repay.

For example, when looking at affordability, the FSA said lenders did not include any factors to assess a customer’s ability to repay in retirement where repayments are to be made from retirement income.

Despite this though, the FSA decided that on the whole, mainstream lenders have been largely complying with its requirements and have policies that should ensure that customers are treated fairly.

Specialist lenders on the other hand, are said to be focusing too strongly on recovering arrears and sticking to a strict mandate rather that taking borrowers’ individual circumstances into consideration.

As a result, the FSA said it is “considering” referring several firms to enforcement and others have been asked to undertake further remedial work.

About 250 mortgage advice firms were also reviewed by the FSA. It found that they need to do more to establish their clients’ affordability, including gathering better evidence to support their reasons for advice and doing more to take customers existing outgoings into account.

All up, seven small mortgage advisors have already been referred to enforcement. And a further 23 are required to review customer files.

Personally, I feel a little enraged by this because I just can’t see what’s fair about the conclusions the FSA has reached.

The lenders may or may not be referred to enforcement, while it’s certain that some mortgage advisers are being referred to enforcement.

I was under the impression this review was going to focus on whether lenders were being responsible in their lending activity and, if not, they would be punished and face stricter levels of regulation.

Well, I’m now sorely disappointed.

After waiting weeks to learn the FSA’s findings, the most it seems the lenders are going to get is a warning to treat customer fairly? Isn’t this just old hat?

Last month FTAdviser raised the issue of lenders acting irresponsibly and said that more work must be done on affordability models when deciding who to lend to and how much to lend. We also suggested that lender must ensure mortgage lending is based on income multiples and affordability in order to support consumers and prevent them from falling into negative equity - or worse.

But obviously this was just wishful and now it seems mortgage advisers are to carry the can for lenders who doled out mortgage loans willy-nilly.

I know the age old argument is that consumers shouldn’t borrow more than they can afford, but if a lender is willing to give it to them why shouldn’t the borrower assume they can afford it? Surely they wouldn’t have been lent it otherwise, right?

Wrong. And this is the problem.

The balance between how far a lender must go to ensure it adequately assesses a customers’ ability to repay and what steps a consumer should take to ensure they can repay the mortgage is not easy to get right and is something that should probably be up for debate (feel free to start it here).

But if the FSA seriously wants to put a stopper on the increasing number of arrears and make sure they don’t outstrip the CML prediction of 45,00 by the end of the year, a much harsher stance than this is needed.

At the very least, one that goes further than saying it is “considering” referring several lenders to enforcement would be a good start.

Clarification on Self cert and fast track from the powers that be would be helpful. What ever way they are dressed up, are they acceptable to the FSA or not, too much fence sitting comes to mind

Enough is said and highlighted. It’s upto the FSA to standup and take actions against these lenders. Start with the high street Banks first and then look for small firms. Why not clean up the bigger stores first instead of wasting time and money on smaller dealers. It makes sense - True?

I find it amazing that a lender can streamline it’s process and it’s cost’s by financially profiling prospective clients and then deciding that they do not need to check this information. The mortgage broker is then brought to task for not supporting what a client says with hard copy information. There seems to be an inbalance here!!!!

So whats new? It has always been the case that the FSA picks on the small fry first because its easier and makes them look as though they are doing something. When it comes to the really important issues i.e Equitable Life or Northern Rock to name but a couple, they fail to spot the flaws in those companies business models.

Maybe a meaningful definition from the FSA of what constitutes affordability might be helpful for both lenders, advisers and borrowers so that we all know what is required. But at this stage the words pigs and flying come to mind?

Yet again the FSA adds up one and one and gets four.

Whilst there are clearly some advisers that should be hanged, most did their job within the guidelines layed down by THE LENDERS. The lender should be held accountable, they had the power to say no, not the adviser.

The client signed a declaration stating their income, what further proof is required?

Yet again we see the FSA taking the path of least resistance. Attack the small adviser as the big lender has teeth and can fight back.

The same companies, through their brokers where advising how to package mortgages to get through. Companies that requested blank payslips and did fast track mortgages, now want to say the adviser is at fault. I for one could see the future problems and never got involved.

I also find very predictable that many clients will have selective memory loss when it comes to making a claim. We the adviser asked the questions and record the answers and the client received their KFI showing what would happen when the rates moved by 1%. The client new the costs and if they could afford it, its not my job to say what one client can afford, this depends on to many factors. What else are we expected to do!

The lender have underwritten the application, accepted a signed document from the client saying that they earned X.

Oh give it up. This headline is the usual whine about how everyone is to blame for mortgage problems other than those poor mortgage brokers. Meanwhile on Planet Earth, the consumer is able to read about the queues of mortgage brokers currently forming outside FSAs Enforcement Department for all manner of failings quite aside from those relating from this Quality of Advice work.

In short, the mortgages section of the FSA Handbook places on both Brokers and Lenders. For the Brokers offering advice, these are straightforward: know your customer, make sure your mortgage contract is suitable and affordable - and record this for 3 years. MCOB 4.7 contains a surpising amount of specific detail as to what this entails. And the enforcement actions being undertaken against mortgage brokers are equally straightforward: if there’s no evidence of customer earnings on the file and principal says that they just give the client whatever he wants rather than look at affordability, it is an open and shut case of a rule breach by a Broker.

How is this ‘carrying the can for lenders’?

The obligations on Lenders are quite different. Rather more fuzzy and open to opinion. They’re only expected to keep records as to ability to repay for a year. This is why FSA has to think about whether to take Enforcement Procedings - there is no guarantee that they would succeed. Of course, I hope they do act against some lenders. But whether or not they do, this does not affect whether brokers met their own obligations, committed fraud etc.

As for naming and shaming lenders, unless FSA can succeed in Enforcement Action, then it cannot do this. S.348 of FSMA requires them to deal with regulated firms on a confidential basis.

I think Mr Purle must see the world in bold shades of black and white. In your simplified examples, yes the case would be clear. However, cases are not always so simple. In my mind it seems unfair that Brokers can get punished for not showing affordability when it is the lenders that do the credit scores and get to see exactly what the client has been up to.

If my client comes to me and says I earn £xxx amount, owe £yyy amount in loans and my credit is good, I don’t have many tools to check otherwise. The lender does have access to tools to check this so I do feel more pressure should be put on them than the brokers.

Let’s not forget, it is perfectly plausible for a client to pass a credit score but still be at high risk of default

If we treated every client as a liar and criminal just to try and satisfy KYC and TCF, what kind of a state will our industry be in?

I think Christoff’s posting misses the point. Both the rulebook and the Enforcement cases against Brokers have indeed been this black-and-white.

Look at the cases so far. How many of these involve client’s giving plausable coherent information and the adviser making a reasonable stab at assessing affordability? Clue: none.

From the Final Notices issued so far, it’s the ones who have made no attempt at this exercise, or have gone down a self-cert route for no reason, or just assisted the client in lying (or indeed, are the client and have lied themselves - as in 2 cases) who are being subjected to enforcement action.

The rules that Brokers have broken in these cases are clear-cut. Yes, if you are offering ‘advice’, you must at least have a stab at assessing afordability regardless of the Lenders obligation. This simply isn’t being done.

Then compare the situation with the lenders. The rules applying here are fuzzy and in all cases there is paperwork suggesting some form of compliance. Enforcement in these cases would involve FSA having to demonstrate that the lenders just haven’t been very good. And most of the records for this probably no longer exist.