'All clear' for self-cert loans
Lenders have adequate controls in place to sell self-certification mortgages, the UK's financial watchdog has said.
The Financial Services Authority (FSA) undertook a review of the industry following allegations made by the BBC's Money Programme.
The programme alleged some house buyers were being encouraged to lie about their income in order to get mortgages.
Lenders do not require documentary evidence of borrowers' incomes for self-certification mortgages.
The FSA concluded "lenders' controls are generally appropriate for this business" and it has written to chief executives of the major mortgage lenders with its findings.
Warning
Self-certification mortgages account for 6% of overall mortgage balances.
The FSA said the number of customers who encountered difficulties with repayments were currently "not significantly higher" than people with standard mortgages.
"This suggests that borrowers have not been taking on larger mortgages than their income would justify," the FSA noted.
However, Philip Robinson, the FSA's spokesman on financial crime issues, warned people that it was a criminal act to lie on their application.
The Council of Mortgage Lenders welcomed the findings of the review.
Michael Coogan, director general, said: "It is reassuring that the regulator's review does not find any evidence of widespread abuse of lending practices.
"However, we would endorse the FSA's view that each firm should continue to evaluate the effectiveness of their controls in relation to self-certification and fast-track lending."
