CML responds to FSA mortgage market findings

The Council of Mortgage Lenders welcomes today's finding from the Financial Services Authority that firms do not appear to be incorrectly selling sub-prime mortgages to prime customers.

The FSA has confirmed that lenders are not among the five firms referred for enforcement action. However, all lenders will want to review and possibly tighten their responsible lending policies, and ensure that they are applied consistently in practice.

The FSA rightly urges consumers, as well as lenders and intermediaries, to be responsible in their actions. To help borrowers, the CML has produced a new consumer factsheet that lenders are free to use or adapt, to highlight the main things to consider when taking out a sub-prime mortgage. This is available on the CML's website.

The CML is also undertaking a range of new work with members to improve the flow of market information on the "adverse credit" sector - the part of the mortgage market concentrating on lending to borrowers with past credit difficulties.

In particular, the CML is working towards establishing standard definitions for the various categories of adverse credit lending, which will make it easier for lenders to benchmark the performance of different categories of business.

On the other review findings that the FSA has published today - mortgages into retirement and interest-only mortgages - the CML welcomes the FSA's efforts to provide guides and good practice examples, and will be reviewing the findings to assess what further industry action should be taken.

Commenting on the findings, CML director general Michael Coogan said: "The sub-prime market has an important role to play in helping people with past credit problems to rehabilitate their finances. But we acknowledge that, in particular, lenders and intermediaries in the sub-prime sector need to demonstrate that they are complying fully with the FSA's responsible lending requirements. We will be considering how best we can help lenders to do this.

"Once again poor record keeping is highlighted as an issue. A robust "reasons why" letter setting out the basis for any recommendation may well help firms to avoid these shortcomings, a point we made before the new regulatory requirements were introduced in 2004."