There are worrying weaknesses in some lenders’ underwriting processes and teams which expose them to risks of mortgage fraud, the Financial Services Authority has warned.
Edna Young, strategy specialist for financial crime and intelligence at the FSA, says that the regulator’s Mortgage Fraud Thematic Review found that some underwriters showed good understanding of risks, but others were unable to identify common warning signs of fraudulent applications, such as round figure salaries.
She says: “We found that some staff were overstretched and required to meet extremely tight process targets.
“Furthermore, a number of firms had chosen to employ less experienced underwriting staff who followed processes rather than assessing risk.”
Young also points out that at some lenders, sales staff were used to obtain underwriting information from borrowers, which is concerning as they are focused on sales targets rather than mortgage fraud risks.