Ninja Mortgages

According to The Guardian there is evidence of an abundance of, what Americans call, Ninja mortgages (No Income, No Job or Assets) having been sold in the UK.

These mortgages and debts are, when looked at in the cold light of day, unaffordable by many of the people who are sold them. However, that doesn't seem to have stopped brokers and banks foisting them on the unwary.

The reason for this wanton disregard for financial probity is simple, commission. Brokers are paid a nice fat commission for selling these products, and therefore have a vested interest in selling as many as possible.

Which? claim that the rot set in during the 1980's with endowment mortgages.

Since then, the financial services industry in Britain has been happily destroying its reputation and most probably the economy.

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FSA To Warn on Sub Prime Market

The Financial Services Authority (FSA) will this week issue a warning about the UK's subprime mortgage market, which lends to people with poor credit records.

The FSA will criticise both lenders and brokers, when it publishes the results of its investigation into the mortgage market.

The FSA has reportedly found poor record-keeping at some brokers, showing that they are unable to demonstrate that they sold customers mortgages that were suitable for them (echoes of the endowment mortgage scandal, don't these people ever learn?).

The FSA's report comes amid the continuing collapse in the US subprime market, partly due to a sharp rise in borrowing costs in the past three years.

Another nail in the coffin of the tarnished reputation of the UK's financial services industry.

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A Portent of Doom?

The news that Jon Hunt, the owner of estate agency Foxtons, will sell Foxtons for around £370m to BC Partners a private equity group has caused a few worries in the housing market.

This signals to many that Hunt has, in effect, "called the market" and decided that now is a good time to get out of UK property.

Foxtons started trading in a converted Italian restaurant in Notting Hill 26 years ago, it now has 19 branches in London. Hunt will continue to work in the US market.

Last year, a BBC undercover documentary made a number of allegations about the firm. It claimed staff used faked documents to support inflated prices, put forward false offers to sellers, and made use of customer information passed on to them by Foxtons-owned mortgage broker Alexander Hall, which is also being bought by BC Partners.

Foxtons joined the industry's ombudsman scheme, an independent dispute resolution service which can award compensation, this year.

The sale of Foxtons UK business is subject to regulatory approval, which is expected within six weeks.

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Financial Brokers Exposed

The Publican warns of two financial brokers who are scamming licensees:

"Gateway Finance.co.uk and Funds4Business, the brokers exposed by The Publican after ripping off licensees, are making it onto TV.

BBC South’s investigative programme Inside Out has been looking into their director Gary Thomas, and has interviewed victims of the financial broker.

The Publican unveiled the company in February 2005 following investigations, which revealed that licensees were left out of pocket after loans promised by the company failed to materialise. The company was also the subject of an investigation by The Mirror, following The Publican’s investigations.

Licensees claimed they had been promised a loan or mortgage, paid an administration fee of £350 and had not received the deal they have been promised.

Some have even paid arrangement fees of nearly £2,000 while others have paid for a valuations costing up to £1,600 and have still not been provided with the deal they were promised.

The programme will be shown on BBC 1 South Friday, January 26 at 7.30pm".

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Caveat Emptor

As if Britain's financial services industry did not have a bad enough reputation already, another nail has just been driven into it by the Financial Services Authority (FSA).

It seems that, according to the FSA, over 66% of mortgage advisors are failing to provide suitable advice in relation to mortgages, and some do not carry out the appropriate background checks required on prospective customers.

The FSA conducted a survey of 252 mortgage advice companies using; mystery shoppers, FSA visits and questionnaires.

Less than 33% of those surveyed had processes which ensured advice given was suitable.

The FSA said:

"We found significant failings in the advice-giving processes in a number of mortgage firms. Poor processes increase the risk of unsuitable advice being given.

It is essential that firms have robust processes in place, so that they treat their customers fairly and provide suitable advice. It is crucial that customer needs are assessed properly. Customers should consider what they can afford both now and in the future, taking into account any likely changes to their circumstances."

Some companies have been "referred to enforcement", and face the risk of hefty fines.

These findings further damage the poor reputation of some mortgage advice firms. Less than 3 months ago one mortgage broker firm was fined £17K by the FSA for cold calling and mis-selling payment protection insurance.

Some mortgage brokers were also found to be misleading borrowers who had a poor credit history.

The old adage "caveat emptor", buyer beware, is as applicable today as it's always been.

You have been warned!

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