FSA tells lenders to improve broker panel supervision

A number of lenders are not employing due diligence in the management of their broker panels, according to the Financial Services Authority’s Mortgage Fraud Thematic Review.

Speaking at the FSA’s Financial Crime Conference today, Edna Young, strategy specialist for financial crime and intelligence at the FSA, says the review identified weaknesses in lenders’ relationships with both solicitors and brokers.

She says while firms are now more aware of the risks involved in third party panels, weaknesses remain in due diligence on third panels.

For instance, some lenders were found to have as large a panel size of brokers and solicitors as they did before the financial crisis when volume levels were at their peak.

Young says: “Some brokers on lenders’ panels were no longer in practice, and some firms only used the FSA register to make checks on brokers, but this does not give enough information.

“Some lenders use networks to manage their broker panels, but not all took sufficient steps to check the networks and therefore had no information on the brokers on their panels.”

She also notes that some lenders use regional sales managers to manage relationships with brokers, but points out these managers can be incentivised almost entirely by sales targets.