British to shut down 'liar loan' services
Source: Agencies |
October 20, 2009, Tuesday
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Print Edition
Print Edition
BRITAIN'S financial regulator said yesterday that it plans to ban "self-certification" mortgages, in which borrowers do not have to prove their income, as part of a tightening of lending rules in the wake of the financial crisis.
The Financial Services Authority said the plan to end so-called "liars' loans" would make lenders responsible for verifying borrowers' income and assessing their ability to repay a loan.
The watchdog is also calling for a ban on mortgages containing "toxic combinations" that put borrowers at a higher risk, such as lending a high proportion of a property's value to people with poor credit histories.
Critics say the FSA's lax regulatory style contributed to last year's banking crisis.
John Pain, the FSA's managing director of supervision, said the previous lending system had caused some people "great financial distress."
"We recognize that we need to bring about a step change in regulation and we need to act now to address the issues we have identified," he said.
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