The Financial Services Authority (FSA) has referred seven mortgage firms to enforcement and forced 65 firms to undertake costly reviews after a series of investigations found several mortgage brokers continue to operate well below standard.

The 65 firms will have to undertake costly past business reviews or employ specialists to resolve problems. A few firms have ceased business until they can rectify failings. The FSA said it will begin a further review in January 2008 of quality of advice for mortgage processes, and it is looking to report a considerable improvement when the work is concluded in June 2008.

The FSA is also currently carrying out a related project which is looking at the extent to which lenders are meeting the requirement to lend responsibly and expect to report the findings of this in spring 2008. The reviews examined the assessment of affordability, self-certification mortgages, training and competence standards, and the effectiveness of senior management controls.

The self-cert review targeted 48 brokers several of whom were suspected of breaching FSA rules. The investigation confirmed many serious failings, including readiness to proceed with arranging a mortgage despite doubting the accuracy of financial information customers were giving them.

Stephen Bland, FSA retail intermediary sector leader, said: “During the reviews we saw a number of good brokers who are meeting the required standards and they are being undermined by the negligence or willful non-compliance of others. However there are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry.

“We found some firms willing to offer mortgages they know to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with treating customers fairly - hence the large number of enforcement referrals and other regulatory actions.”

The Council of Mortgage Lenders (CML) urged the FSA to ensure that its guidance is as clear as possible. According to CML, the findings relate only to brokers and not lenders. The results of the FSAs review of the extent to which lenders are meeting their responsible lending requirements are due next spring.

Michael Coogan, CML director general, said: “After three years of regulation, the FSA is right to expect its regulatory standards to be in place across the whole market. These findings are a wake-up call to those brokers who are behind the pace.”