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Only 41% of small brokers check income

The Financial Services Authority has today released the findings of its review into small firms and financial crime, which shows only 41% of small mortgage businesses are obtaining income verification.

Out of the 46 firms that conducted mortgage business the FSA found that 19 firms – 41%  – obtained income verification and 19 obtained two forms of identification.

Only five firms gathered evidence of an applicant’s source of funds and only three firms said they obtained specific Know Your Customer information as part of the FSA’s financial crime reporting requirements.

The FSA launched the project in April 2008, aimed at establishing the extent to which small firms across the financial services industry addressed financial crime risks in their businesses.

The regulator said most firms were aware of potential suspicious indicators when conducting mortgage business, such as customers having difficulty verifying income and individuals who hold a PAYE job applying for self-cert mortgages.

The FSA says most firms indicated that when requested they would make Know Your Customer information available to lenders, however lenders rarely asked for it.

Less than half the firms said that they would find out why a mortgage application had been declined as lenders were reluctant to disclose such information.

In its review, the FSA also says: “We noted that some small firms, particularly sole traders, had difficulty in aligning their financial crime systems and controls to the legislative and regulatory requirements.”


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  • Post a comment
  • derek 27th May 2010 at 9:22 pm

    What has become of HONOUR and promise to pay,Trust and INSURANCE ?? There should be no can’t pay wont pay.Endowment policies should suffice,if Nationalised,there could be a large pot as in the National insurance,DVLC,Premium Bonds,and Lottery schemes.

  • simon murray 26th May 2010 at 6:45 pm

    This is all pretty desparate sensationalism over a non-issue. Self-cert is dead and fast-track discretionary so income proof and money laundering id, address proof is the norm. Wouldn’t it be better if the FSA concentrated on the risks mortgage applicants expose themselves to by going direct to lenders and the lack of comeback if it all goes pearshaped

  • Howard Bowes 26th May 2010 at 3:51 pm

    I find it hard to believe that the FSA can report such findings while investigating such a small cross section of brokers.
    It is further unlikely to be an accurate picture of the current application process with lenders as we see a fraction of cases ‘fast track’ whereby we have already obtained proof of income and there are no current Self Cert mortgages available – or at least that is my understanding as a broker of 11 years.

  • Howard Bowes 26th May 2010 at 3:31 pm

    I find it hard to believe that the FSA can report such findings while investigating such a small cross section of brokers.
    It is further unlikely to be an accurate picture of the current application process with lenders as we see a fraction of cases ‘fast track’ whereby we have already obtained proof of income and there are no current Self Cert mortgages available – or at least that is my understanding as a broker of 11 years.

  • Peter Yates 26th May 2010 at 11:34 am

    I recently asked an employed chef for payslips/P60 to be told his employer provides neither. He went along to his local Halifax and surprise, surprise- ‘NO PROBLEM, SIR’. We brokers don’t lend and we supply everything the lenders request, so why put the responsibility for income verification on us? FSA, you’re barking up the wrong tree: scrutinise the lenders more and please stop picking on the little guys. We did not cause the banking crisis.

  • Dan McGeehan 25th May 2010 at 6:18 pm

    Is this what mortgage strategy call news now. This report was started in 2008 and since then the market has changed dramatically. The network we are with require before they pay us our proc fee to have ID, address verification and proof of income. The FSA will also know this having visited our network as well as the rest within the last 12-18 months. Additionally as most of the other comments state fastrack is exceptionally rare the you have as much chance of Shergar winning the next grand national as you have of submitting a self cert mortgage.

  • Mark James 25th May 2010 at 3:58 pm

    Absolute sensationalist rubbish ! Every lender asks for proof of income and even on the odd chance that a case gets Fast Tracked is anyone going to be silly enough not to have evidence in this day and age ? No, what I’m annoyed about is the number of clients that go to a bank DIRECT and then say to me that they didn’t require proof of income. That’s right the main banks.

  • Rona 25th May 2010 at 2:06 pm

    If the project was launched in April 2008 why are the findings only just being highlighted?

    I am utterly amazed that brokers are not collecting income information and ID as how are they submitting the applications to the lender as these would be chased?

    I agree with the comments that more has to be done to check what the lenders are doing themselves under the guise of fast track as I have had enquiries recently where I couldn’t help but the clients had been told it would be ok under the fast track system?

    It does feel like it is easy to kick the broker, particuarly the small broker but more attention needs to be paid to what the lenders are doing.

  • Jonathan Miller 25th May 2010 at 11:47 am

    This report stinks of the FSA fighting back against lenders who have proved that Fast-track has worked. Numerous lenders have shown that their lending books on fast-track cases have out-performed the status cases, but the FSA still seem adamant to have it withdrawn which would then have a devastating effect to lenders service standards.

    This still does not excuse those who still fail to keep any income evidence on file, which I cannot believe still happens in this market. Are they unaware on how this could bite them back?!

  • Paul 25th May 2010 at 9:31 am

    Anonymous | 24 May 2010 5:08 pm

    Excellent comment. New entrants to the broker market have a far more realistic level of expectation and requirements than a lot of brokers who operated during the boom times. There are many great brokers about who have always performed the require checks but unfortunately many relied upon packagers and lenders who far too much. Good luck with your new career I hope it works out for you. For what it’s worth I believe this is a great time to be joining as the market is improving, and as a new entrant you will not bemoan the lack of self cert and very relaxed criteria. If and when this returns you will view it as a bonus rather than the necessity.

  • What? 24th May 2010 at 10:06 pm

    This is astonishing. The lenders are the ones lending the money. It is their responsibility to verify information.

    MCOB made no such requirement of brokers. Brokers are not acting as warrantors for sloppy lenders.

    The FSA cannot be trusted. They make the rules up as they go along. Some moral authority they are.

  • Graham Flint 24th May 2010 at 6:22 pm

    having been a broker and got fed up of losing clients I decided to join a lender as an advisor. I can categorially tell you that when cases fast track we do not require income proof. lets not forget however one is advised and the other is non-advised

  • wasim 24th May 2010 at 5:08 pm

    For somebody who qualified (CeMAP) in 2008 at the time of credit crunch as a career change from IT, all this really adds to my confidence in joining the industry.
    Seriously, whats going on?
    I had to wait almost 2 years as networks were failing left, right and… well you know – now I joined Openwork and am due for my training in mid june, what takes my breath away is the magnitude of gap between the regulator and some of the brokers.
    Seriously, people that naive that they wont check the customer’s details???

    You wouldnt buy a car from a hippy, why would any lender lend to brokers who havent done their due diligence?
    Read the economic sentiment, there’s alot of annoyed people and brokers please, those leapfrogging over unicorn, pull your finger out. We have to set standard, work collectively, professionally.

  • Andrew Brinn 24th May 2010 at 4:21 pm

    Any chance we can have some more detail on this report,when it was done for example,how many files checked,do they mean income confirmation from clients employer or payslips on file ? Any one know where this info is available surely it must be available to view to the public,they are a public body after all !!

  • Rob Barwell 24th May 2010 at 4:18 pm

    Total Bull…For this last year alone,both networks that I have been with insist on proof of income being on file or we dont get paid period.

  • colin 24th May 2010 at 4:17 pm

    whats all this nonense about brokers only half completing forms, that may have been the case in the 90’s, but everything is electronic submission now whereby all info has to be completed or you can t send it……

  • Maurice Edgington 24th May 2010 at 3:50 pm

    I have the feeling that this research from the FSA may be about self-cert or fast track dating back a while. I have heard lender’s underwriters complaining that quite a number of brokers do not send in complete applications, why I have no idea. Perhaps there is a percentage of brokers who are not competent enough to arrange a mortgage properly. If so they should at least be aware that the FSA may catch up with them one day…but who knows.I have no problems provising what is required, it makes the job so much easier.

  • Carl Hall 24th May 2010 at 3:44 pm

    I think the message is relating to self cert mortgages, its up to the lender to set out a the criteria and if they dont ask for proof of income then why obtain proof. Forgive me if i’m missing a trick here but does’nt self cert mean self cert.

  • Trevor Johnston 24th May 2010 at 3:39 pm

    I for one would be interested in how the cases are processed. I though self-cert was banned. Which lenders do they submit the applications to. I understand there is fast track but if you are sampled, which I have been myself, then you will need it on file. I am suspicious of any infomation provided by the FSA. I doubt these figures are a manipulation!!
    PS Are the tories not going to get rid of the FSA?

  • Ancient Wisdom 24th May 2010 at 3:37 pm

    That may have been the case 2-3 yrs ago – certainly not now.

    Its the small 1 man bands who are directly authorised that make up most of this number, I know our network compliance come and check our files randomly every 6months.

    The brokers that are still around are the ones who do their job properly and have done in the past.

  • Perplexed 24th May 2010 at 3:26 pm

    Unbelievable, and brokers wonder why Lenders have trouble trusting them! We should go back to the days of no income proof, no mortgage and scrap the abused self-cert mortgage.

    Anon, you clearly do not work in our industry becuase what you propose went into effect quite some time ago.

    Stop trolling.

  • Matt 24th May 2010 at 3:23 pm

    To be honest I find this quite astounding that so many don’t have these requirements. As an AR of a large network these are Standard File Requirements and if the income isn’t substantiated then the case cannot go ahead! Payslips and bank statements are a must and if the payslips don’t match the bank statements our compliance dept have a field day! Glad they are looking out for us!

  • Justin Fordham 24th May 2010 at 3:21 pm

    I agree with Anonymous | 24 May 2010 3:09 pm! I also find this very hard to believe, as most lenders now ask for evidence of income, the odd one goes fast track, but even still i always get the last payslip and bank statement, just in case they do ask! All my mortgage files have evidence of income or i tell the client I won’t do the case! As for ID?! Why would anyone risk not getting this, or at least doing an electronic ID check on their client?

  • Perplexed 24th May 2010 at 3:21 pm

    This is laughable. I would have thought that with the size and strength of the FSA they would be able to look at more than 46 firms before releasing some half baked proclamation which seems to have the sole purpose of injecting yet more negativity into our fragile industry.

    Also, regarding PAYE people applying for Self Cert mortgages? I thought self-cert mortgages were banned by the FSA over a year ago?

  • Dark Haired Underwriter 24th May 2010 at 3:19 pm

    It’s worth noting that the report does not indicate at what stage a file was reviewed. When submitting an application to a lender I cannot believe that, at the moment, there are many occassions when income verification is not received by the broker or the lender. However, if the file was checked by the FSA prior to submission then there may well be a different picture. This is not about trust between lenders and brokers as indicated by a previous comment but more about lenders requiring proper valid information/verification and asking reasonable questions at the right time. Also I note that the time frame of the files being checked as not detailed. Are these files from 2007 when self cert was all the rage?

  • tom 24th May 2010 at 3:17 pm

    im sorry, but this is utter bs. Every single mortgage i arranged last year i had to prove income to the lender, so naturally it had to be on file. The way it is at the moment if you cannot provide proofs to the lender your not completing, end of!

  • John Apicella 24th May 2010 at 3:15 pm

    As a broker who has fallen foul of the FSA for the very same reason, my files ALL show proof of income but the FSA were asking that brokers contact employers and confirm income too! A number of my clinets has told me that going direct on a fast track deal none of the lendrs asked for proof of income” So lets have a go at the brokres again, they are too small to hurt the FSA!!

  • Iain Wood 24th May 2010 at 3:14 pm

    As an ex-underwriter I can believe this. A high proportion of application forms were barely completed with name and address let alone containing supporting documentation, and we still had to endure brokers moaning about service levels whilst dealing with this dross

  • colin 24th May 2010 at 3:09 pm

    i find this very hard to believe, how on earth are these brokers submitting applications ??…practially all my cases the lender asks for evidence of income, the odd one goes fast track, but even still my files have evidence of income and being an L&G AR its standard file quality.

  • A Lender 24th May 2010 at 3:08 pm

    Unbelievable, and brokers wonder why Lenders have trouble trusting them! We should go back to the days of no income proof, no mortgage and scrap the abused self-cert mortgage.

  • ajk 24th May 2010 at 3:06 pm

    OK so its the sole traders who are to blame again ! What about inhouse branch mortgage sellers of high steret lenders using fastrack to put low ltv mortgage through without proof of income- or maybe the FSA dont think this particulr sector are high risk!!!