Michael Clapper, CEO of London-based Enterprise Group, has welcomed the findings of the recent FSA review on sub-prime mortgage advice and warned brokers to see it as a wake-up call.
The review conducted by the FSA, was to assess whether advisers were taking reasonable steps to ensure that recommendations to take out sub-prime mortgages were suitable to the needs and circumstances of the customer.
It found in 80% of cases, that there was lack of evidence to show how the recommended sub-prime product met the customer’s needs and circumstances.
Clapper says: “This is what we have been warning about for some time. Advisers choosing to access sub-prime lenders directly or accepting automatically cascaded solutions, without researching the market thoroughly first and just for the benefits of speed and
ease of use, are at risk of falling foul of the regulator. Brokers must prove that the market was thoroughly researched prior to making a recommendation.”
Andy Watson, head of the mortgages and credit union department at the FSA, says: “Sub-prime is a growing area of the mortgage market and we have identified it is a priority area for our mortgage supervision.”
“Many of the failings related to poor record-keeping, and brokers could provide more detail when challenged, but we will be looking for better evidence of compliance with our requirements in
Clapper adds: “The benefits of a sound packager have never been so significant, now that the FSA have warned they will be looking more closely at record-keeping and the justification of recommendations being made. Enterprise supports its introducers by providing seven factually ranked solutions in minutes, from our entire panel of lenders, based on any client priority requested. This has no lender, product or fee bias and provides a full record for the client file that all options were considered prior to making a recommendation. Brokers using our service can sleep well at night, knowing that they cannot fall foul of the regulator in reviews to come in this area.”
Enterprise Group is widely recognised as one of the largest and most innovative providers of broker services in the UK, specialising in the packaging of mortgages, secured loans, bridging finance and commercial loans, under branded arrangements.
Current partner networks include Openwork, Mint Financial services, Thinc Destini and Home of Choice.
It is authorised by the FSA, as an Arranger of regulated mortgage contracts.