FSA U-turn sees lenders escape the need to justify rejected applications
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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 published the review in June in a bid to crack down on fraudulent behaviour.
In its proposals it claimed it was good practice for intermediaries to ask lenders their reasons for refusing applications.
However, it performed a U-turn in its final guidance to firms last week.
The guidance says: “We acknowledge 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.”
Experian’s fraud index last week revealed that 49 in every 10,000 applications were found to be fraudulent in the three months to September, up 53% compared with the previous quarter and 77% higher than the same period in 2010.
Experian says over 90% of fraud originates from genuine individuals misrepresenting their financial situation to buy property that would otherwise be out of their reach. It says it tends to see fraud rise when consumers are financially stressed.
Experian’s analysis shows most first party mortgage fraud, around 60%, comes from individuals not disclosing previous addresses to conceal past credit problems, while a further 20% of cases involve borrowers exaggerating their employment status.
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