As a result, the FSA revealed, seven firms have been referred to Enforcement, and a number of other firms are being considered for referral. Also a further 65 firms are to undertake costly past business reviews or will employ specialists to resolve problems. A few firms have ceased business until they can rectify failings.

The FSA additionally on Monday published case studies and examples of good and poor practice, to help firms assess and improve their own progress.

The reviews - across a range of brokers operating in the prime and sub-prime markets - examined the assessment of affordability, self-certification (self-cert) mortgages, training and competence standards, and the effectiveness of senior management controls.

The 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, explained that:

"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 wilful non-compliance of others. We also saw some who despite having some way to go, were willing to engage with us and be helped to improve their performance, which is why we are providing so much guidance following these reviews. However there are still an unacceptable number of firms unwilling to change and they are damaging the rest of the industry."

He continued:

"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."

And concluded: "Overall there is a need for a big improvement in senior management's use of management information to help achieve the fair treatment of their customers to achieve the progress we and the industry as a whole want to see."

The main areas identified in the reviews as needing improvement include the assessment of affordability; the collection of customer information to establish clients' needs and, if needed, to judge plausibility of incomes in self-cert business; supervision and assessment of advisers' competence; and the use of management information. The reviews also identified areas where firms' practices could lead to an increased risk of fraud and money laundering.

The FSA will begin a further review in January 2008 of mortgage quality of advice 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, looking at the extent to which lenders are meeting the requirement to lend responsibly, and expects to report the findings of this in spring 2008.