Only 41% of small brokers check income
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The Financial Services Authority has today released the findings of its review into small firms and financial crime, which shows only 41% of small mortgage businesses are obtaining income verification.
Out of the 46 firms that conducted mortgage business the FSA found that 19 firms - 41% - obtained income verification and 19 obtained two forms of identification.
Only five firms gathered evidence of an applicant’s source of funds and only three firms said they obtained specific Know Your Customer information as part of the FSA’s financial crime reporting requirements.
The FSA launched the project in April 2008, aimed at establishing the extent to which small firms across the financial services industry addressed financial crime risks in their businesses.
The regulator said most firms were aware of potential suspicious indicators when conducting mortgage business, such as customers having difficulty verifying income and individuals who hold a PAYE job applying for self-cert mortgages.
The FSA says most firms indicated that when requested they would make Know Your Customer information available to lenders, however lenders rarely asked for it.
Less than half the firms said that they would find out why a mortgage application had been declined as lenders were reluctant to disclose such information.
In its review, the FSA also says: “We noted that some small firms, particularly sole traders, had difficulty in aligning their financial crime systems and controls to the legislative and regulatory requirements.”
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Readers' comments (30)
Anonymous | 24 May 2010 3:06 pm
OK so its the sole traders who are to blame again ! What about inhouse branch mortgage sellers of high steret lenders using fastrack to put low ltv mortgage through without proof of income- or maybe the FSA dont think this particulr sector are high risk!!!
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Anonymous | 24 May 2010 3:08 pm
Unbelievable, and brokers wonder why Lenders have trouble trusting them! We should go back to the days of no income proof, no mortgage and scrap the abused self-cert mortgage.
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Anonymous | 24 May 2010 3:09 pm
i find this very hard to believe, how on earth are these brokers submitting applications ??...practially all my cases the lender asks for evidence of income, the odd one goes fast track, but even still my files have evidence of income and being an L&G AR its standard file quality.
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Anonymous | 24 May 2010 3:14 pm
As an ex-underwriter I can believe this. A high proportion of application forms were barely completed with name and address let alone containing supporting documentation, and we still had to endure brokers moaning about service levels whilst dealing with this dross
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Anonymous | 24 May 2010 3:15 pm
As a broker who has fallen foul of the FSA for the very same reason, my files ALL show proof of income but the FSA were asking that brokers contact employers and confirm income too! A number of my clinets has told me that going direct on a fast track deal none of the lendrs asked for proof of income" So lets have a go at the brokres again, they are too small to hurt the FSA!!
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Anonymous | 24 May 2010 3:17 pm
im sorry, but this is utter bs. Every single mortgage i arranged last year i had to prove income to the lender, so naturally it had to be on file. The way it is at the moment if you cannot provide proofs to the lender your not completing, end of!
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Dark Haired Underwriter | 24 May 2010 3:19 pm
It's worth noting that the report does not indicate at what stage a file was reviewed. When submitting an application to a lender I cannot believe that, at the moment, there are many occassions when income verification is not received by the broker or the lender. However, if the file was checked by the FSA prior to submission then there may well be a different picture. This is not about trust between lenders and brokers as indicated by a previous comment but more about lenders requiring proper valid information/verification and asking reasonable questions at the right time. Also I note that the time frame of the files being checked as not detailed. Are these files from 2007 when self cert was all the rage?
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Perplexed | 24 May 2010 3:21 pm
This is laughable. I would have thought that with the size and strength of the FSA they would be able to look at more than 46 firms before releasing some half baked proclamation which seems to have the sole purpose of injecting yet more negativity into our fragile industry.
Also, regarding PAYE people applying for Self Cert mortgages? I thought self-cert mortgages were banned by the FSA over a year ago?
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Anonymous | 24 May 2010 3:21 pm
I agree with Anonymous | 24 May 2010 3:09 pm! I also find this very hard to believe, as most lenders now ask for evidence of income, the odd one goes fast track, but even still i always get the last payslip and bank statement, just in case they do ask! All my mortgage files have evidence of income or i tell the client I won’t do the case! As for ID?! Why would anyone risk not getting this, or at least doing an electronic ID check on their client?
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Anonymous | 24 May 2010 3:23 pm
To be honest I find this quite astounding that so many don't have these requirements. As an AR of a large network these are Standard File Requirements and if the income isn't substantiated then the case cannot go ahead! Payslips and bank statements are a must and if the payslips don't match the bank statements our compliance dept have a field day! Glad they are looking out for us!
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