Home and County Mortgages pays £52,500 for poor management

Inflation of customers’ incomes on mortgage applications and weaknesses in its sales processes has cost retail mortgage broker, Home and County Mortgages Ltd (HMCL) a £52,000 penalty. The company, which provides advice exclusively to local authority tenants who wish to purchase council houses at a discount under the right to buy scheme, was visited by the FSA Small Firms Division (SFD) in November 2005. SFD was concerned especially with the selling practices of one of its advisers, identified as ‘A’ in the final notice. HMCL undertook an internal review of A’s cases and found evidence that incomes had been falsified, in order, the adviser said, to help customers secure a cheaper mortgage. Between 31 October 2004 and 7 December 2005, the period in issue, A advised in 83 out of 600 cases. At a disciplinary meeting in March 2005, A was given a final written warning for having “wilfully and negligently failed in a large number of compliance aspects”. Although the company said it had restricted the adviser’s role thereafter, breaches continued until the individual left HMCL in October 2005. The firm’s “serious complaints” register records two cases of falsified employment details and inflated incomes for A’s customers after the March meeting. The FSA holds that HMCL therefore did not act properly to prevent A from putting customers at risk (Principle 2) since failure to meet mortgage payments could have led the local authority to classify them as “intentionally homeless” in which case it would have had no obligation to provide alternative accommodation. The firm accepted that it had not put systems and controls in place to prevent inflation of customers’ incomes, a breach of Principle 3.