FSA bans firm for remortgage scam; Directors arrested

The FSA has banned a mortgage broker for submitting remortgage applications with false information.

Several of the firm's directors have also been arrested by Northumbria Police following the FSA's investigation of the fraud.

Principals and mortgage introducers at Newcastle Home Loans (NHL) knowingly submitted remortgage applications to fund property purchases, which resulted in the lender advancing sums which were considerably higher than the purchase price of the property.

In total, the lender referred 157 cases to the FSA including 20 regulated mortgages.

In December 2005, the lender raised concerns over the accuracy of property valuations after a review of a number of applications for both regulated and unregulated mortgage contracts submitted by NHL.

Serious differences were found between statements made on the mortgage application forms and information held at the Land Registry.  A wider review found mortgage applications were being presented as remortgages when they were actually purchases.

On 17 May 2006, the lender removed NHL from its panel after finding the actual purchase price paid for some properties was significantly lower than the valuation.

Earlier this year NHL failed to pay a fine of £170,000 for submitting false information in mortgage applications and for allowing David Purdie to act as its chief executive without FSA approval.

The FSA also banned NHL's directors Linda Patterson and Grace Darling Purdie, and fined Purdie £85,000.  David Purdie and mortgage introducers Michael Foster and Kenneth Robinson- have also been banned.

The FSA's investigation found the individuals involved were not fit and proper and should be prohibited from any further involvement in regulated activities or authorised firms.

In relation to Grace Darling Purdie, the FSA also found she failed to exercise due skill, care and diligence in managing the business of NHL and took no steps to satisfy herself the business was being conducted in accordance with regulatory requirements.

The regulator worked closely with Northumbria Police and the Solicitors Regulation Authority (SRA). Northumbria Police recently arrested Grace Darling Purdie, David Purdie, Linda Patterson and Michael Foster, among others.

Margaret Cole, FSA director of enforcement, says: "The failures at NHL were serious, deliberate and occurred as a matter of routine. Its principals acted in a totally unacceptable fashion and their actions and the actions of those connected to the firm posed a serious risk to the lender and to market confidence generally. We will continue to tackle mortgage fraud and perpetrators will find themselves facing bans and higher fines."