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A validation lifeline for small brokerages

The Financial Services Authority’s review Mortgage Fraud Against Lenders and recent MMR proposals mean a more complex and costly process for lenders wishing to source business from small, directly authorised firms.

The FSA’s announcement about further deferring implementation of the approved persons regime may prove to be the final straw for some lenders. With just one in three small DA firms having survived the credit crunch, the future of the rest hangs in the balance.

Many of these firms are well established. Their local business ethos provides a flexible backbone for the wider market. But some lenders, facing increased responsibility for vetting intermediaries, are showing less appetite for validating such firms. To survive, small DA firms may have to merge with larger businesses or networks, or risk being excluded by some lenders.

It is easy to see this leading to less choice for customers and a further concentration of risk in the larger intermediaries that emerge.

We are examining how small DA firms might join forces to create a central registration platform to provide the information to meet lenders’ compliance requirements.

A shared validation database could provide a lifeline for thousands of firms. The cost of such a solution would be more than matched by the benefits to customers and the industry.

If there is a will to progress this, the time for action is now – the clock is ticking.

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