As a CeMAP qualified mortgage advisor, the advisor must follow FSA (Financial Services Authority) guidelines, and this is an area covered in the CeMAP course and exam.

Chepstow Financial Services were recently fined £10,500 for failing to follow FSA guidelines in the sales process used with self certification mortgages.

The FSA said they were not satisfied that the affordability of the mortgage broker recommended mortgage contracts was assessed correctly and that the customers’ declaration that they could afford their mortgage was relied on too heavily and not checked.  Mr Jeffreys of Chepstow Financial Services had not put adequate procedures in place to ensure that his mortgage advisor business was not used by customers to commit mortgage fraud.

Mr Jeffreys was also unable to demonstrate how he trained, supervised and monitored his mortgage advisor staff and in some cases did not disclose adequately to clients the additional fees payable for using his mortgage advice business to find the mortgage products.

FSA Head of Retail Enforcement, Jonathan Phelan, said:

“Mortgage brokers are entitled to rely on information provided by customers about their incomes, but asking customers to sign a declaration that they can afford the mortgage repayments does not absolve brokers from taking steps to assess and record whether the recommended contracts are affordable and suitable.  In all of the client files we reviewed we found that the customers had made false declarations about their incomes, and Mr Jeffreys simply accepted this information at face value. Consequently his business was more at risk of being used to commit mortgage fraud.”

The failings were discovered during a series of FSA visits to mortgage brokers in 2007, focusing on self certification mortgages in particular and the affordability of mortgage advice.  The original fine would have £15,000 but by co-operating fully and settling early, Chepstow Financial Services qualified for a 30% discount under the FSA’s settlement procedures.

It is a legal requirement that all UK mortgage advisors must hold the CeMAP qualification or its equivalent and act in accordance with FSA regulations.   Approximately 80 per cent of UK mortgage advisors hold their CeMAP.

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