Don’t ask why cases have been refused, FSA tells brokers
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The Financial Services Authority says brokers will not be required to ask lenders why they have refused mortgage cases, as a result of its Mortgage Fraud Thematic Review.
The FSA has today published its feedback and policy rules resulting from its review.
In June the FSA published its review, which claimed it was good practice for intermediaries to ask lenders their reasons for refusing applications.
However in its policy statement released today, it says: “We acknowledge that there are reasons why a lender might want to withhold this information, if, for example, they have suspicions about the intermediary.
“While we consider that sharing this information is a valuable fraud prevention tool, we acknowledge the difficulties faced by intermediaries seeking to apply this piece of good practice and have decided to remove it.”
The FSA however says it still encourages lenders and intermediaries to work together to improve their information sharing.
The FSA has clarified its position after its thematic review in June appeared to contradict itself and stated that it was good practice for intermediaries to seek reasons for application refusals, but also that it was poor practice for a lender to require underwriters to justify all refusals to brokers.
The FSA has also changed its guidance for firms reporting information to its Information From Lenders scheme.
The regulator says it understands that some firms, particularly smaller firms, may not be able to justify the expense of participating in some of these initiatives.
In its policy statement the FSA says: “We have amended our guidance to clarify our expectations in relation to information sharing.
“We only expect firms to share information via IFL that we have indicated is relevant. And although it is good practice for firms to engage in cross-industry information-sharing initiatives, we understand that some firms, particularly smaller firms, may not be able to justify the expense of participating in some of these initiatives.”
Some respondents to the review also suggested that fraud risk should be considered during product design.
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Readers' comments (23)
Des Platt | 9 Dec 2011 12:18 pm
And meanwhile, in the real world....
What planet do they inhabit?
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IAN WINDSOR-SMITH | 9 Dec 2011 12:20 pm
So all brokers are now under suspision? the autocratic lenders can say and do as they wish without question? who says so? The FSA. Real progress for removing the IFA's and brokers altogether.
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Andy Wilson FS | 9 Dec 2011 12:32 pm
As a broker, it is extremely frustrating to have cases declined which, following research, seem to fit lender's criteria and where clients have a clear credit record. In these cases it is important to know where they have failed, even if it is only in terms of particular criteria issues.
I know that lenders will not have concerns about me as a broker and it serves to just make our jobs even harder if lenders cannot help us to avoid stabbing in the dark on cases which fail.
The FSA about-turn after just 5 months following their previous guidance is also frustrating. Lenders intending to follow their original guidance will just about have got around to putting a procedure in place, only to see the need for it removed. Then again, perhaps they just ignored it?
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jc | 9 Dec 2011 12:33 pm
And what about the suspicions on the FSA and grossly underqualified staff, oops sorry silly me forgot "that doesn't matter"
About time the FSA crawled into a corner and wasted away quietly instead of continually making fools of themselves with these non-sensical statements
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Jonathan Burridge | 9 Dec 2011 12:37 pm
We should shout "HOUSE" every time "Fraud" is mentioned. Now it is to be used as a justification for a lender not explain a poor decision, or be questioned on a decision that might be based upon incorrect information.
So what was once the "I can’t tell you because of Data Protection" excuse is now "FSA rules say that I cannot explain".
I get it. I understand that some people commit fraud, that some people commit mortgage fraud. I accept that some mortgage brokers, solicitors, surveyors (and come to that one must also suspect lenders) have committed fraud and that lenders and the regulators systems were inadequate for purpose.
Surely, surely, lenders and regulators have to stop crying wolf on this issue at some point?
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Roger Travis | 9 Dec 2011 12:37 pm
i thought the new EU rule due in over the next couple of years meant lenders had to tell applicants why they had been turned down?
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Des Platt | 9 Dec 2011 12:37 pm
Quite right Ian. This is why I am retiring next Christmas from a job I absolutely love and clients, who with all due modesty, love me. I am just sick of these imbeciles.
I was asking a BDM from Leeds this week why they had brought their age limit down from 85 to 80 as it seemed to be out of line with people livinga nd working longer and the known fact that a lot more people in their 60s have mortgages. They told me that the FSA had put pressure on them to do so.
Great. Well done FSA. So now 80 year olds who can easily afford their interest get forced into equity release 5 years earlier. Another great outcome .
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Stuart Duncan | 9 Dec 2011 12:40 pm
I don't criticize for the sake of it, but if we do not know why a case has been turned down then we may well get a repeat because we are not allowed to stop using a lender just because they have turned a case down. In reality, we should not have to ask as TCF would require that we and the client are informed unless fraud is suspected.
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Andy Alcock | 9 Dec 2011 12:48 pm
To me the answer is quite simple, if the broker is suspected of fraudulent activity the lender could come up with stock answers that would not tip off a broker that they are suspected of fraudulent activity. If no fraud suspected they should provide the feedback, but once again the many are punised for the crimes of the few.
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Maurice Edgington | 9 Dec 2011 1:00 pm
This is much along the lines as to why the FSA tried to supress the report on why the big banks had to be bailed out using taxpayers money because most of the blame is directed at their governance of the industry. I would say that it is treating customers unfairly not to tell them why they had been refused. However, we have no effective voice on anything much in the UK now.
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