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Brokers advised to cover their backs when selling B2L

Repossessions specialist Moore Blatch has warned brokers that with buy-to-let arrears and repossessions levels rising it’s vital that they use investment style warnings to cover their own backs.

The firm warns that some brokers may now face the threat of litigation if any buy-to-let investor can support a claim that the broker provided advice that went further than purely that of providing a mortgage.

It is concerned that litigation lawyers could have a strong case against a broker if they recommended buying properties as an investment using a buy-to-let mortgage.

The repossession expert warns that buy-to-let mortgages can be seen as heavily geared investment vehicles and therefore need appropriate warnings.

With the number of loans in arrears approaching 2% and repossessions now standing at 0.22% it says the scale of the problem calls for immediate regulation and is calling for the buy-to-let industry to be regulated.

In the mean time, Moore Blatch is advising any broker that sells the mortgage to firstly document that they are not giving any investment advice and secondly provide an appropriate investment style warning.

While neither are currently required by the FSA they could help support the broker’s legal position if any client decided to take civil action in the future.

Paul Walshe, head of lender services at Moore Blatch, says: “Action needs to be taken urgently to protect the interests of both brokers and lenders.

“We urge the FSA to ensure that buy-to-let investment is subject to the same consumer warnings as other forms of investment, particularly at this time when many amateur investors are facing substantial losses, and many can argue that they were not warned.”


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