The Financial Services Authority (FSA), the U.K. nongovernment finance regulator, recently concluded that several subprime mortgage lenders and intermediaries use weak and irresponsible lending practices, and it questioned the ability of several firms to assess mortgage affordability properly. The FSA has also begun "enforcement action" against five firms, though which firms and what action is being taken have yet to be made public.

Several U.K. investors have praised the FSA review as a good step toward ensuring a solid future for RMBS. "The FSA's statement last week regarding U.K. nonconforming lending provided a strong positive to the sector, in our view," said Societe Generale senior analyst Chris Greener. "We believe that high arrears are in part driven by aggressive sales tactics employed by brokers competing for business and that the FSA's message was that it will not tolerate such behavior.

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