3. FSA threatens mortgage brokers

The Financial Services Authority (FSA) threatened strong action against dishonest mortgage brokers, saying that there were “many serious failings” among brokers who sell self-certification mortgages. The FSA staged four reviews of mortgage brokers last year. It referred seven firms for investigation and told 65 more to check their work.

"There are still an unacceptable number of firms unwilling to change, and they are damaging the rest of the industry", said Stephen Bland of the FSA. "We found some firms willing to offer mortgages they know to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible," he added.

"These practices are completely inconsistent with treating customers fairly – hence the large number of enforcement referrals and other regulatory actions," he said.

The FSA has been responsible for regulating the sale of mortgages since 2004 and has found it an area of the financial services industry with considerable problems.

The main one is that of so-called "self-certification" mortgages, where people produce their own paperwork to show that they can afford to repay the loan they want to borrow.

Failing to ask for evidence of income, even when the figures were implausible, exposed lenders to the possibility of fraud, the FSA believes. The regulator blames senior management of some broking firms for the problems, accusing them, in some cases, of failing to run their firms or control their staff properly.

The FSA's warnings have been endorsed by the Council of Mortgage Lenders (CML), which points out that the regulator's views related to brokers, not lenders.

"The CML supports action against brokers, which fail to address compliance weaknesses when drawn to their attention by the FSA," says Michael Coogan, CML director general. "These findings are a wakeup call to those brokers who are behind the pace."

The CML welcomes the FSA's publication of case studies and examples of good and bad practice to help mortgage brokers improve the overall quality and consistency of their treatment of customers. However, the CML urges the FSA to ensure that its guidance is as clear and unambiguous as possible. The CML says it supports action against brokers who fail to address compliance weaknesses when drawn to their attention by the FSA. Poor practice undermines the reputation of good brokers, and of the wider mortgage industry, it says.

The CML points out that it has also helped promote the FSA's initiative to introduce a whistleblower arrangement for lenders to report suspected broker fraud. It also claims that it has been instrumental in coordinating financial support from lenders for http://www.tcfinfo.co.uk/, which is a website designed to help brokers implement "Treating Customers Fairly" in practical terms.

"After three years of regulation, the FSA is right to expect its regulatory standards to be in place across the whole market. These findings are a wakeup call to those brokers who are behind the pace," says Coogan. "But the FSA also needs to make sure that it sets out its expectations clearly and unambiguously, which does not always happen. This is particularly important for small broking firms," he adds.

The CML’s members include banks, building societies and other lenders who together undertake around 98 per cent  of all residential mortgage lending in the UK. There are 11.8 million mortgages in the UK, with loans worth more than £1.1 trillion.

(03/12/07)
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4. Land Registry fraud

Land Registry Office (LRO) has stopped anonymous online access to deed-holder information after an identity theft incident prompted parliamentary debate over LRO’s data security arrangements.

Business number identification is now required for online access to Land Registry Direct, and all other document requests must be made in writing. However, the Office of the Information Commissioner (OIC) said the changes may still not conform to data protection best practice.

The changes will not restrict the work of conveyancing practitioners, said Maria Connolly, partner specialising in commercial property matters at TLT Solicitors.

"The safeguards introduced by the Land Registry should provide important comfort for landowners by ensuring that sensitive or confidential information is not used for inappropriate or fraudulent purposes," she said. "The new procedure does not preclude copies of documents, such as mortgages, being obtained, but the new application process will make it harder to do so."

Documentation made available by LRO includes the full name and address of the deed holder, date of birth, names of mortgage providers, mortgage account numbers and signatures, but not details of the loan amount. The information is typically used to check that the seller of a property is also the owner and when individuals wish to put together their own Home Information Pack (HIP). The online service also allowed users to call up information about the owner of a property by entering a street address.

"Under existing Land Registry rules, an application can be made to exempt certain confidential or prejudicial information from otherwise publicly available documents, and professional advisers should continue to consider this with their clients before sending documents to the Land Registry," Connolly noted.

The adequacy of LRO data protection arrangements were queried in parliament this week by the MP for Hitchin and Harpenden, Peter Lilley, who said that one of his constituents had been a victim of identity fraud after having his signature copied from documents accessed on the LRO website. The constituent had rented out a property, and within days the tenant had used the website to download the property deeds, which included the owner's signature. The fraudster then forged a power of attorney and transferred ownership of the property into his name before taking out a mortgage for £140,000 and disappearing. LRO offers a guarantee on deeds and has, as a consequence, paid out about £12 million to address fraud over the past three years, it was revealed in parliament. LRO pays off mortgages fraudulently taken out when title deeds have been transferred to someone who is not the genuine owner.

The Office of the Information Commissioner says it is not good practice to make signatures available online as LRO has done, and this reservation would also apply to the new arrangements in which non-business inquiries must be in writing, unless signatures are redacted out from documents. The OIC also says that it is unhappy with how local authorities have been making signatures, and even mobile telephone numbers, available in relation to planning applications.

"Data controllers really have to ask themselves whether making available that level of personal data is necessary for the task in question," an OIC representative said.

(16/11/07)
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Articles

1. The SDLT relief that never was

Journal: Tax Journal
Citation: Issue 914, 5
Issue date: 17 December 2007
Author: Gordon Keenay
Summary: This article reviews the very first tribunal decision on stamp duty land tax (SDLT) and how it will affect the interpretation of tax statutes, tax policy, administration and future SDLT disputes.
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2. HIPs: the first 100 days

Journal: Solicitors Journal
Citation: 151 SJ 46, 1554
Issue date: 7 December 2007
Author: Fiona Barron
Summary: This article looks at how the Home Information Pack (HIP) has impacted business and how HIP providers are fitting in with the conveyancing process. It is approaching 100 days since the introduction of the HIP for three-bedroom properties.
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3. Trespass revisited

Journal: Solicitors Journal
Citation: 151 SJ 46, 1548
Issue date: 7 December 2007
Author: Mark Pawlowski
Summary: This article argues that landowners will have to be more reasonable when claiming damages for temporary trespass. It considers the recent case of Sinclair v Gavaghan [2007] EWHC 2256 (Ch), which involved a temporary user of the claimant’s land to gain access to the defendant’s development site.
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4. SDLT: property development issues

Journal: Tax Journal
Citation: Issue 911
Issue date: 26 November 2007
Author: Roger Thomas
Summary: This article looks at some of the stamp duty land tax (SDLT) problems facing property developers. It will be appreciated that the rule that construction works undertaken by a purchaser and benefit the vendor should be treated as part of the price for a land transaction is completely separate from the rule that cash paid by a purchaser for building works undertaken by the vendor is only in certain circumstances to be treated as part of the land price. This focuses simply on works done by P as consideration for the transfer of land by V.
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5. Can HIPs save the planet?

Journal: New Law Journal
Citation: 157 NLJ 1634
Issue date: 23 November 2007
Author: David Marsden
Summary: Home Information Packs (HIPs) were originally suggested as a way of preventing gazumping. A HIP must contain an index, a sale statement, title information, a local search, a drainage and water search and an Energy Performance Certificate. The HIP must be commissioned before the property is marketed.
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This e-alert is not intended to provide comprehensive records of information concerning the property sector. If you have any feedback or suggestions, please email propertysection@lawsociety.org.uk. This e-alert was created in conjunction with LexisNexis UK Legal Updater Service. For further information about any of the articles, please contact claire.melvin@lexisnexis.co.uk. The views expressed by the Legal Analysis interviewees are not necessarily those of the proprietor.
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