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Nine brokers under FSA investigation for fraud

The Financial Services Authority is investigating nine brokers for suspected fraud, Mortgage Strategy can reveal.

The regulator says nine current cases against brokers have an element of mortgage fraud involved and it could take enforcement action against these individuals.

John Malone, who represents brokers on the National Fraud Authority’s Mortgage Fraud Forum, says the investigations probably relate to business done in 2007 and 2008.

He says: “Considering gross lending totalled £362bn in 2007 and £254bn in 2008 and brokers did around 60% of business, nine investigations for fraud is relatively low.”

Nick Baxter, director of Mortgage Promotions, says the number shows there is only a small amount of fraud perpetrated by brokers.

He says: “It is only a small number of brokers but it tarnishes the industry. Lenders and regulators have to ensure they don¹t tar all brokers with the same brush.”

Last week the FSA published its Mortgage Lenders’ Round-Up newsletter in which it claimed that brokers are abusing buy-to-let mortgages to help self-cert clients.

David Geale, manager of retail intermediaries and the mortgage sector at the FSA, says brokers are using some buy-to-let and let-to-buy deals to circumvent stringent income and affordability checks on regulated residential mortgages.

“He says: ³This is particularly the case where lenders are offering buy-to-let products to first-time buyers and where affordability is based on
projected rental income only.

“We believe lenders with weak systems and controls are likely to be exploited by intermediaries still looking for self-cert mortgages.”

Malone says he knows of several lenders that have been approached by brokers with buy-to-let deals that are clearly for self-cert clients, but it is a small number.

But David Whittaker, managing director of Mortgages for Business, says the FSA is focussing on a small issue to justify buy-to-let regulation.

He says: “It is trying to build a case to regulate the buy-to-let sector so is using anecdotal evidence as an example of why regulation is needed.”


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  • bobby 27th June 2011 at 1:42 pm

    Only about 8000 brokers to go FSA and your work is complete. Well done for protecting the public against the evil of mortgage brokers. The bank are just so much more honest and honourable.

  • Glen McKeown 27th June 2011 at 12:40 pm

    Full marks to Nick Baxter for putting the “problem” in perspective.
    The main danger is that the FSA can have front line publicity, but the rebuttal is hard to find, so both practitioners and public are led to believe in an industry riddled with corruption. That does not lead to improved standards nor to good consumer take up.
    There is a bundle of social research that demonstrates that conforming to standards is most effectively achieved by stressing the high level of existing conformity; it is also relatively cheap to operate and takes up considerably less staff than putting the boot in.
    Can’t understand why the FSA don’t use this technique – especially as Hector Sants degree is in psychology.

  • Robin Banks 27th June 2011 at 12:20 pm

    I remember back in 2004 headlines such as “we embrace regulation”, “we should not fear regulation” and “we look forward to regulation” and a whole lot more.

    When oh when will people learn that the only beneficiary of regulation is the regulator! The consumer has lost out because there is far less choice!

    In five years time there will be no place for brokers to trade, either because the cost of regulation is prohibitive or regulation itself is prohibitive (or both).

    Call me old fashioned but this industry worked a whole lot better before regulation got it’s greedy hands on it.

  • Damien Brassneck 27th June 2011 at 12:11 pm

    Robin 9:49 – The only thing that’s changing is the name over the door and broker scrutiny will continue to grow in intensity.

  • Robin 27th June 2011 at 9:49 am

    When are the FSA being disbanded? I thought that was the plan by this Govt. They really are a total waste of space. I could point out brokers & non-brokers who are breaking their petty restrictive rules every day, but tick the right box, so the FSA are happy. Pathetic & the sooner this bureaucratic costly regulator is gone the better!

  • salil chaudhari 27th June 2011 at 9:46 am

    spot on Mr Whittaker