FSA could probe lending decisions

The Financial Services Authority is believed to have purchased technology to analyse lending decisions and demand explanations where cases appear unusual.

Fair Isaac, a provider of decision management solutions, has revealed the regulator is a customer for its Blaze Advisor rules management system. Blaze Advisor lets companies define decision processes to determine actions that should be taken in response to certain conditions.

James Taylor, vice president of enterprise decision management at Fair Isaac, says the system could be used on information supplied by len-ders to flag up unusual cases.

Since April 2005, lenders have submitted product sales data to the FSA including LTVs, types of mortgages sold and credit histories and incomes of borrowers.

Taylor says: “The challenge for lenders will be having to explain their underwriting decisions.”

But Linda Will, managing director of Accord Mortgages, says: “The FSA already uses product sales data to see if lenders are doing unusual things. I don’t believe it intends to flag up and question underwriting decisions – it’s not feasible considering the amount of information it receives.”

Stephen Knight, executive chairman of GMAC-RFC, says he is not aware of the FSA developing this sort of technology.

He says: “Lenders don’t base their decisions on lending rules. Rather, they score and profile each customer. Therefore a generic approach – if that is being considered – could not have a meaningful industry-wide application.”

The FSA declined to comment on its status as a customer of Blaze Advisor and what it will be using the system for. But it has pledged not to change its product sales data requirements until October 2007.