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FSA fines DB Mortgages for irresponsible lending

The Financial Services Authority has fined DB Mortgages, part of the Deutsche Bank Group, £840,000 for irresponsible lending practices and unfair treatment of customers in arrears, and secured redress of approximately £1.5m for DB Mortgages’ customers.

On lending practices, DB Mortgages failed to show that customers could afford mortgages sold where the term continued after their retirement.

It also failed to consider whether there were cheaper mortgages available for customers seeking self-certified mortgages, and failed to ensure that customers had thought about where they would live at the end of the term if they needed to sell their house to pay off an interest-only mortgage.

On treatment of customers in arrears, DB Mortgages did not consider customers’ individual circumstances or tell them about the range of options that were available to them, and applied charges that were unfair because they were charged repeatedly or did not accurately reflect the cost of administering an account in arrears.

Margaret Cole, the FSA’s managing director of enforcement and financial crime, says:“This is the first time that we have taken enforcement action against a firm for irresponsible mortgage lending. Firms need to understand that we will not tolerate lax lending practices and unfair treatment of customers in arrears.

“Firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged by their failings”.

The FSA has taken into account that DB Mortgages worked in an open and co-operative way with the FSA and has made significant improvements to its arrears handling procedures.  As a result of early settlement, the firm also qualified for a 30% discount under the FSA’s settlement discount scheme.  Without the discount, the fine would have been £1.2m.

DB mortgages was wound down in mid-2008 and no longer originates mortgages.

In a statement, DB Mortgages, says: “Following the identification of the issues raised by the FSA in an industry-wide review started in 2008, DB mortgages immediately commissioned a third-party review into its lending and arrears collection processes.

“As a consequence, DB Mortgages has improved its oversight of mortgage servicing activities DB Mortgages is the fourth lender to settle with the FSA since 2009 as part of the regulator’s ongoing review of mortgage practices.”


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  • thomas potter 4th July 2011 at 2:03 pm


  • Paul Rice 25th February 2011 at 5:28 pm

    An underwriter who was allowed to say ‘no’…….what a novelty that would of been.

    At the company I worked for if you said ‘no’ a packager or broker would of been on the phone to his BDM raining fire and brimstone before you could even take a swig of your brew.

    I would think DB were very much in the same boat.

    ‘No’……..what a hilarious concept.

  • James Hall 25th February 2011 at 12:23 pm

    Perhaps DB were a little generous with their criteria. Their unlimited adverse product for example could be viewed as a step too far even at a sensible LTV.

    But are they really the only ones to blame

    – should packagers and brokers not take some of the responsibility for actively promoting the product to anyone with a pulse. Just because a product is available doesnt make it right to sell it to somebody if you don’t think they will ever pay it and it is going to make the situaion worse. What happened to best advice.
    – perhaps underwriters need to take some of the blame, their job should have been to assess the individual situation and the risk of non-payment, a lot of on-site underwriters were highly paid but acted as no more than box tickers to say all the paperwork was in.
    – and finally the good old consumer, who never takes any of the blame these days. Of course it is all down to those horrible lenders and advisers forcing them to take these awful deals.

    The bottom line is everyone has to take a share of the blame, but luckily for the rest of us DB are the only people in the chain with deep enough pockets to pay a fine.

    Its easy for us all to point the finger now and say the products were irresponsible but if Mr Bloggs who hasnt paid his mortgage for the last 3 months approachs a broker and nothing has changed in his circumstances to indicate that a remortgage will help him

    – shouldnt the client get a grip and address the real issue
    – should the broker say don’t be so stupid and try to find an alternative way to help him out of the mess, or put him in a deal with DB to get a nice fat commission and fee even if they think the client will never pay
    – should the underwriter not be able to say, the circumstances havent changed to indicate they will pay so this is a ‘NO’

    The lender was only wrong to provide this product if the people they made it available to were going to abuse it, there were instances where these kind of products were useful if used in the correct way.

    Unfortunately we have all paid the price for the abuse with the credit crisis it created. Now DB have the double whammy of a fine for good measure and I doubt they will be the last.

  • Gray Haired Underwriter 25th February 2011 at 9:26 am

    The result to be feared. The fact is that DB have been found ‘guilty’ of irresponsible lending and this could open Pandora’s Box. The ruling seems to include issue such as interest only, affordability, lending to older persons and so on. This could cause palpitations in lender legal depts in the same way as Bollands and O’Brien and Etridge.

    The implications could be enormous – the next major mis-selling scandal perhaps?

  • Anon 23rd February 2011 at 12:29 pm

    In my opinion, FSA are leaving the industry wide self-cert review for the CPMA – this speaks volumes by itself.

  • Stuart Gregory 23rd February 2011 at 9:35 am

    I wonder how many borrowers, given ‘Fast Track’ mortgages between 2003-2008 are now finding that no lender will touch them.

    If you want to talk mis-selling, there’s your next Panorama special right there.

    Picking up the pieces that other unscrupulous brokers have left behind is what we have to look forward to.

  • Simon Kershaw 22nd February 2011 at 12:34 pm

    DB Mortgages was a tiny mortgage lender spun out of a sub-prime broker. Perhaps the FSA would like to take a look at the (state owned) Mortgage Express self cert book. I reckon they had at least 25% of the self cert market so should have some interesting stories to tell.

    Bank, state- owned, FSA hard ball enforcement?

    Not a cat in hells chance.

  • Paul Rice 22nd February 2011 at 12:25 pm

    thats right Keith……..I mean brokers had absolutely no duty of care to ensure they were recommending appropriate products.

    Its all the lenders fault at the end of the day……self cert represents such a better risk than full status.

  • Anon 22nd February 2011 at 11:40 am

    Keith, compare and contrast with the LBG issue announced yesterday on Halifax caps.

  • Bill Wells 22nd February 2011 at 11:26 am

    So, is RBS, Northern Rock, Lloyds and Barclays now in their sights – I doubt it.

  • Keith Butler 22nd February 2011 at 10:42 am

    It is entirely right that the FSA should fine firms for irresponsible lending.
    I do, howver, fear that the FSA will do their usual and turn a blind eye to the bigger lenders.