The Financial Services Authority (FSA) has said that fewer people are lying about their incomes to secure mortgages.
In a study of mortgage brokers, it found that “no systematic fraud” concerning self-certification mortgages was taking place. The FSA used mystery shoppers to investigate whether brokers encouraged people to lie about their incomes.
Encouragingly, 41 of the brokers investigated were found not to offer individuals advice on artificially inflating their income to suit a mortgage. However, three cases did. The intermediaries have been contacted by the regulator.
“We welcome the improvements made by lenders in the area of self-certification,” said Clive Briault of the FSA. “But in the light of competitive pressures, tighter margins and rising arrears levels, we expect lenders to remain vigilant and to ensure that their systems and controls are regularly reviewed.”
Self-certification mortgages allow those who cannot prove their income, such as the self-employed, to sign it off rather than show evidence of a salary. If used incorrectly, the mortgages could allow people to sign up to loans which they cannot afford.
However, the regulator also discovered that in 47 per cent of cases which it reviewed brokers did not correctly estimate the affordability of a self-certificated mortgage.
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