The Association of Mortgage Inter-mediaries says obtaining proof of income will soon be mandatory for brokers, after the regulator revealed last week that not all small brokers request it from clients.
The Financial Services Authority released the findings of its review of small firms and financial crime last week, which show not all brokers are obtaining proof of income and only 41% are verifying it.
Of the 46 firms investigated that conducted mortgage business the FSA found most obtained proof of income and 19 obtained verification, while another 19 asked for two forms of identification.
Only five firms gathered evidence of an applicant’s source of funds and only three said they asked for specific Know Your Customer information as part of the regulator’s crime reporting requirements.
The FSA launched its review in April 2008 with the objective of establishing the extent to which small financial services firms address financial crime risks in their businesses.
But Robert Sinclair, director of AMI, says under the current FSA rules it is not brokers’ job to get proof of income but lenders’.
He says: “It is good practice for brokers to check income but it’s not written into the rules that they have to. Under FSA rules a lender must check income and if it asks a broker to supply it with proof this will be part of its contractual terms with the broker.”
But Sinclair adds that once the proposals in the Mortgage Market Review are implemented it is likely the FSA will require brokers to obtain proof of income.
In its report the regulator says most firms are aware of potentially suspicious indicators when conducting mortgage business, such as customers having difficulty verifying income and individuals who hold PAYE jobs applying for self-cert mortgages.
The FSA adds that most firms say that if requested they would make Know Your Customer information available to lenders, but lenders rarely ask for it.