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Mortgage rules to be tightened Last Updated: June 15 2001 05:00GMT

by Lucy Warwick-Ching MORTGAGE lenders will be held responsible for the brokers who sell their mortgages, according to new rules from a financial watchdog. The Financial Services Authority, the City's senior regulator, has issued detailed proposals on mortgage regulation which require greater control by lenders over the way brokers advise their clients. For the first time, the FSA proposes to make lenders whose products are recommended by mortgage brokers responsible for ensuring that information and advice is given to borrowers in a proper manner. The new rules are aimed at protecting consumers throughout the lifetime of their mortgage. As well as improving the information given to potential borrowers before they commit themselves to a loan, the FSA is pushing for rules requiring lenders to keep customers informed of any changes to their mortgage. The proposals also call for the fair treatment of customers who have arrears or face repossession. Under the Financial Services and Markets Act, the FSA has not been given specific responsibility for regulating mortgage advice given by lenders, brokers and other intermediaries. The FSA's previous alleged refusal to ask for the inclusion of such rules in the Act met with criticism from consumer groups. However, today's consultation paper makes lenders directly responsible for taking reasonable steps to ensure that brokers comply with pre-sale disclosure requirements. Michael Folger, director of conduct of business standards division, says: "The aim is to make sure that borrowers are properly informed and properly treated, from the day that they first consider taking out a mortgage to the day that they finally redeem the loan. The new regime is focused on cutting through the jargon and introducing consistent standards. "Responsible lenders will support proposals that will give consumers the information that they need to make an informed and sensible decision about one of their greatest financial commitments. "In today's markets lenders book much of their business through intermediaries. These proposals would make lenders responsible for the quality of early information provided to all their customers, and not just those who deal direct." The Consumer's Association has in the past called for tougher regulation however a spokesman today said they had not seen the consultation document and were unable to comment. The full proposals are set out in a consultation paper, the draft "Mortgage Sourcebook" issued today.


-- (, June 15, 2001

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