Finance Articles

Beacon Mortgage Solutions Warns Home-buyers Over 'Unscrupulous' Mortgage Brokers

Eastbourne, Sussex, UK (PRWeb) December 13, 2006 -- The government's financial watchdog is clamping down on unscrupulous mortgage brokers in an effort to save home-buyers from debt problems, says Beacon Mortgage Solutions, (www.beaconmortgagesolutions.com).

Lenders can make big money out of borrowers with poor credit ratings, and mortgage brokers frequently fail to make basic checks - and even lie about clients' ability to make repayments.

"It's a very sad and worrying situation," says Beacon director David Piper, (www.beaconmortgagesolutions.com). "Consumers want the security of owning their own homes, and rely on mortgage brokers to find the best mortgage deal.

"Unfortunately, because of the sums involved, there is always the temptation to sell the most lucrative deal, rather than the most appropriate."

Borrowers may have a bad credit rating merely because they have missed a few credit card repayments; at the other end of the scale, they may be in serious financial difficulties, and even bankrupt.

"Mortgage brokers have a duty of care to their clients," says Piper. "It's our job to help, not to accelerate the downward spiral into serious debt."

Home-buyers with poor credit ratings are known as "sub-prime borrowers", a pigeon-hole that allows lenders to charge sky-high interest rates. In the UK, the sub-prime market is reckoned to be worth £30 billion a year.

With stakes like that, more and more financial institutions are getting in on the act, and asking brokers - their prime route into the market - to sell their wares.

"The bigger the mortgage, the more the broker earns," admits Beacon's Piper, (www.beaconmortgagesolutions.com). "But there is clearly a balance to be struck. If loan repayments are beyond the borrowers' reach, the more they will default, and lenders will draw in their horns."

"In the long term, unscrupulous brokers are committing commercial suicide - let alone the grief and genuine hardship they inflict in pursuit of the fast buck."

The Financial Services Authority (FSA) is taking an increasingly hard line with mortgage brokers who deliberately - or negligently - sell expensive mortgages to high-risk customers.

A recent FSA study of 31 small mortgage firms and 210 borrowers revealed that:

- 60 per cent of firms failed to gather enough information to ensure repayments could be kept up;
- 67 per cent could not show they had taken client credit histories into account;
- and in three cases, firms appear to have "inflated" the applicants' income in order to bump up the size of the loan.

"It's a small survey, and the findings are probably not an accurate reflection of the sub-prime market as a whole," says Piper, (www.beaconmortgagesolutions.com).     "However, any amount of negligence or oversight - let alone deliberate falsification - has to be condemned.

"The really alarming aspect is that nobody wins. Lenders end up with bad debts, making them more reluctant to offer sub-prime mortgages. Mortgage brokers end up with a narrower range of products to sell."

"Most important, however, borrowers who have comparatively minor financial issues either can't get mortgages or, worse, they are led further and further into debt, with all the anguish and suffering that that involves."

Eastbourne-based Beacon Mortgage Solutions, (www.beaconmortgagesolutions.com) is an appointed representative of Mortgage Next Network Limited, which is authorised and regulated by the Financial Services Authority.

Mortgage Next Network Limited is one of the largest mortgage distribution companies in the UK - in the 2005/06 financial year it completed around £4 billions'
worth of mortgage business - and is entered on the Financial Services Agency register (http://www.fsa.gov.uk) under reference 300886.

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