Sub prime loans in the spotlight
The City watchdog is to investigate whether "sub-prime" mortgage borrowers with poor credit histories are being treated fairly by lenders.
The Financial Services Authority (FSA) wants to know if home loans sales are "suitable and (offer) good value".
The sub-prime lending market - worth billions of pounds - involves lending to people with poor credit records at an interest rate premium.
In the US, thousands of sub-prime borrowers are struggling with debt.
The situation is so bad that some analysts have suggested that the crisis in sub-prime lending in the US could lead to dramatic falls in house prices, as borrowers in arrears have their homes repossessed.
In the UK, the chief concern of the FSA is to find out whether its regulation of the mortgage market is effective in protecting consumers.
It has stated that the risk of consumers losing out "may be higher" in the sub-prime mortgage market place.
The investigation will focus on whether customers are treated fairly over the life of their mortgage, including if they go into arrears.
"This next stage of the Mortgage Effectiveness Review will focus on more specialised sectors where we think there is greater risk of consumer detriment," said Dan Waters, FSA director of retail policy.
"We will also look at the treatment of customers in arrears."
The FSA wants to complete its investigation by the end of the year, and said that it might consider tightening mortgage regulation rules.
In 2006, the FSA examined how the mainstream mortgage marketplace was serving consumers.
It found that consumers were better informed than in the past and were shopping around more frequently for the best mortgage deal.
Source: BBC.co.uk
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