The hanging out to dry of sub-prime dirty washing continues apace and the FSA has already confirmed there’s another four on the way.
But DB Mortgages, the intermediary lender owned by Deutsche Bank, which stopped lending in 2008, was notable as the first lender of the four hauled up for irresponsible lending, as well as questionable arrears practice. Problems include failing to show records on affordability into retirement years and detailing how customers planned to repay interest-only loans.
However, this isn’t the biggest sub-prime lender fine so far. That dubious honour, which the FSA decides based on number of customers affected and duration of problem went to GMAC RFC. The lender paid out £2.8m back in October 2009, alongside an estimated customer redress bill of £7.7m. Kensington paid £1.75m in April 2010 and Redstone Mortgages got a £630,000 fine just three months later.
This is a continuance of the FSA’s message that it won’t tolerate any departure not just from the MCOB rules laid down in 2004, but also from the yet-to-be-finished spirit of the Mortgage Market Review (MMR).
The fines highlight the pain irresponsible lending can cause and keeps reminding lenders the FSA is watching, said the regulator.
This sabre rattling plays into its new zero tolerance image. It also tells us the regulator is likely to apply key industry problems flagged in the MMR retrospectively to the next four lenders under investigation.
But going after past evil-doers Judge Dredd-style is only worthwhile as long as the regulator is applying the same scrutiny to upcoming industry problems. For a battle weary industry, watching providers like DB being hauled over the coals for lending behaviour, which either stopped or has been overhauled since 2008, may feel a little like an empty gesture.
This week, Which? reported two unauthorised sale and rent back firms after a mystery shop for offering unauthorised advice, alongside terrible standards at another seven firms.
The FSA has already tried to get things under control in the SARB sector, but again, the FSA’s failure to closely monitor the industry means slapped wrists and regulation haven’t been enough and the cycle continues.
Until this changes, we’re just playing a waiting game until the next mortgage market outrage.
