Mortgages PLC is warning brokers to treat cascade underwriting with caution, before recommending an alternative product from the same lender to a client.
Peter Beaumont, sales & marketing director at MPLC, says: Cascade underwriting works to the benefit of lenders, but not necessarily borrowers or brokers. There may well be more suitable products available from other lenders and brokers need to remain mindful of their responsibilities to their clients.
There is scope for brokers to fall foul of mortgage regulation by simply endorsing an alternative product put forward by a lender, because its easy and convenient to do so. Brokers should undertake further product research and make a fresh recommendation supported by a revised Key Facts Illustration.
Cascade underwriting has been introduced by a number of lenders in an attempt to provide a one-stop shop proposition to brokers.
With cascade underwriting, if an application is declined the lender will make the broker aware of alternative mortgage products which may be suitable for the applicant.
Although this is certainly more useful than simply being told that an application has been declined, brokers still maintain a responsibility to identify suitable alternative products from the wide-range available in the market.
Beaumont adds: As the battle for new business becomes more intense, it is inevitable that lenders will try to find ways of preventing potential customers being lost to competitors.
“However, it is the broker and not the lender who is responsible for the product recommendation and it is therefore the broker who is answerable to the FSA if a query about product suitability should arise in the future.