Brokers not tipping off FSA on fraud at lenders
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Only seven mortgage brokers have reported suspected fraudulent activity by lenders to the Financial Services Authority in the last seven years.
The regulator has maintained records since 2004 and says since then just seven brokers have reported suspected fraud by staff within a lender.
In 2006 the FSA launched its Information From Lenders scheme encouraging lenders and other firms to report suspected fraud by brokers.
Since then the scheme has generated more than 1,000 alerts about brokers from lenders, but it seems brokers are reluctant to report suspected wrongdoing at lenders.
John Malone, executive chairman of PMS and brokers’ representative on the National Fraud Authority’s mortgage fraud forum, says he is surprised by the low volume of brokers tipping off the FSA.
He says: “One of the big criticisms I am always hearing from brokers is about the behaviour of lenders’ BDMs, particularly between 2002/03 and2007/08.
“In some instances BDMs showed brokers how to get around lenders’ systems and underwriting criteria for certain applications.”
Malone says he has spoken to brokers who refused cases because they had suspicions about the borrower but later discovered that the borrower went direct to a lender and was accepted.
But Mike Fitzgerald, sales and marketing director at Emba Group, says that he is not surprised by the low number of reports by brokers as he has never suspected lenders’ staff of trying to commit fraud.
He says: “BDMs are trying their hardest to help brokers get their cases accepted but I have not come across any fraudulent behaviour as they would need a corrupt underwriter as well, which I have not encountered.”
A spokesman for the regulator says it has a dedicated section on its small firms website where brokers can find out how to report mortgage fraud.
The FSA also has a whistleblower hotline where brokers can report fraud anonymously.
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Readers' comments (14)
Swanny | 11 Apr 2011 9:16 am
There is a big difference between double standards and fraud.
It is highly unlikely a broker would see fraud unless of course they are involved !!!!!
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Anonymous | 11 Apr 2011 9:30 am
This is the most unsurprising article ever.
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Anonymous | 11 Apr 2011 9:40 am
The difference between Brokers and Bank Mortgage advisers is that many of the latter have underwriting mandates.
Therefore, it is easier for their cases to be "engineered" through the system.
The Bank world is rife with top performing Mortgage Advisers suddenly being asked to leave - I wonder why that might be?
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Trevor Goodridge | 11 Apr 2011 10:02 am
Anything to do with TARGETS. I wonder!!! Targets put people under pressure. What do you expect.
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Anonymous | 11 Apr 2011 10:30 am
BDM's often helped brokers to prepare cases prior to submission. This wasn't due to fraud but normally down to contradictory lending criteria and in many cases pure semantics. There often needs to be an element of common sense in underwriting but most of the time automatic underwriting took place via online AIP's and most of the time BDM's were simply explaining how best to submit a case.
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Evan Owen | 11 Apr 2011 10:48 am
Brokers biting the proverbial hand? No chance.
"The FSA also has a whistleblower hotline where brokers can report fraud anonymously." A black hole where valuable information apparently vanishes without trace. Little wonder nothing gets reported.
Re: Anonymous 11 April 2011 9:40 am. Until recently I wouldn't have believed this was possible but I saw a directly written case last week where a bank's lender arm had arranged a mortgage when anyone with any gumption would have declined it. Dodgy payslips, the lot.
I can't be bothered any more, it is a shambles out there.
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Anonymous | 11 Apr 2011 10:56 am
I work for a corporate estate agency, and the number of "unusual" mortgages being arranged by small brokers is staggering. This is the area that needs addressing!
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Anonymous | 11 Apr 2011 12:33 pm
John’s comments are absolutely true especially about BDMs. I have witnessed BDMs (usually target related) practically rewriting a case to hide detail that would normally get it turned down. I have witnessed conversations between broker/packager and actual lender case underwriter discussing how to “slide” a case through, including valuation change.
I have also reported what I consider blatant fraudulent activity by a broker / packager
to the regulator, both by the whistleblow system and also personally (supplying documents). I have also reported such concerns to a lender. (This was all about two years ago).
When I asked the regulator about progress, I was first told the file could not be found (it was later located) and was also told that it is not their policy to discuss progress of any such reports.
The lender was most striking as he quite simply ceased to answer my calls. The Police were very interested but as I was a 3rd party and not the person who had suffered actual loss then the CPS would not pursue. I began to feel that it was me in the wrong for trying to report it and so I quite understand Evans comment that all information seems to disappear into a black hole and I do understand also why he can’t be bothered anymore.
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fed up with the fsa | 11 Apr 2011 1:09 pm
How any broker who works for a corporate estate agent can comment on ''small brokers''. How many of your appointments are forced on your purchasers/sellers ''YOU HAVE TO SEE OUR MORTGAGE BROKER''. Unregulated estate agents are a joke. I bet you have only ever used 3/4 lenders in your very small minded life.
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bill smith | 11 Apr 2011 2:06 pm
Anonymous | 11 Apr 2011 10:56 am
I work for a corporate estate agency, and the number of "unusual" mortgages being arranged by small brokers is staggering. This is the area that needs addressing!
Could it be that the cannon fodder advisers who work for corporate agents are so useless at placing a tricky case that you assume it must be fraud as opposed to a broker doing a good job??
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