Page last updated at 10:02 GMT, Monday, 8 September 2008 11:02 UK

Regulator closes mortgage broker

Mortgage application form
More dishonest brokers are being caught by the FSA's campaign

Another mortgage broker, Coventry-based Mr Mohammed Habib, has been closed down by the Financial Services Authority (FSA).

It is part of the regulator's campaign to stop brokers mis-selling mortgages, or submitting fraudulent mortgage applications.

Mr Habib was told to stop working as a mortgage advisor and to compensate any customers who may have lost money.

The FSA said he had failed to ensure his customers received suitable advice.

"We will continue to take disciplinary action against mortgage brokers who cannot demonstrate that the products they recommend are affordable," said Jonathan Phelan, the FSA's head of retail enforcement.

"Where we have concerns about the quality of the mortgage advice given, we will continue to require mortgage brokers to undertake reviews of past business, often at considerable cost to them, to identify and remedy any unsuitable advice," he warned.

Censure

In the case of Mr Habib, who traded as MAH Mortgage & Finance, the FSA found he had no records to show that his clients could afford to repay the home loans he had arranged.

Nor could he prove that the self-certification mortgages he had recommended were right for the customers.

Mr Habib would have been fined 22,500, but as he was unable to pay he was censured by the FSA.

He was also told to pay for a review of all his past business to see if customers had lost any money, and was banned from any form of mortgage broking business regulated by the FSA.

Tougher rules

So far this year the FSA has taken action against more than 20 different mortgage brokers for problems ranging from inadequate paperwork, to incompetence and outright fraud.

Since the downturn in the property market started a year ago, mortgage lenders and the financial authorities have become more worried about the prevalence of fraudulent mortgage applications, often involving dishonest professionals in the property industry.

This month new rules were brought in to stop lenders becoming the victims of over-inflated property valuations, particularly for newly built flats in city-centres.

Developers and builders must now reveal if they have offered incentives to buyers, such as cash-backs or paying for furniture or legal fees.

Lenders have become increasingly worried that these sorts of deals have helped inflate the price of some properties, thus inflating the mortgages that have been granted on them.


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