Press
Mortgage Solutions 3rd April 2006
Market Watch
Do you think the Financial Services Authority's (FSA's) stance over whistle-blowing is tantamount to getting lenders to be responsible for brokers' actions?
Priya Shome
Purely Financial Group
Lenders do have a responsibility to report brokers who they suspect of operating fraudulently as this is often the quickest way the FSA can be alerted to rogue brokers. If a case is suspected to be fraudulent the lender should not proceed until it is satisfied the case is above board. Unless the lender reports its suspicions to the FSA, the risk is that the broker will get the case through with another lender and the client could be left in a compromising situation with a mortgage that potentially they cannot afford.
As suggested by Michael Coogan, director-general of the Council of Mortgage Lenders, a systematic approach would be more desirable as this will encourage more lenders to report the frauds if the system is quick and simplistic.
If lenders were somehow able to be informed by the FSA as to who had been reported, perhaps via a warning and a blacklist, this would help a great deal and would prevent brokers from being able to pass the deals on to another, unsuspecting lender.
Ian Giles
Kensington Mortgages
We believe brokers are vital in ensuring borrowers get good mortgage advice, particularly in the specialist sector. But this can only hold true if there is trust in intermediaries. As the champion of the consumer and the guardian of their rights, it is the FSA's role to promote a financial services industry in which the public can have confidence. A major part of this job is to police the industry and weed out those organisations that give poor service or break the rules.
To achieve this in such a large market the regulator needs the support of responsible firms, whether they are lenders or brokers. Whistle-blowing is one method the FSA can use to unearth unscrupulous or poorly performing brokers, and it is reasonable to expect that all responsible firms advise them of anything that contravenes mortgage rules.
This does not mean the FSA holds lenders responsible for the actions of brokers, far from it. They do, however, expect that prudent, well-run firms share their vision of a clean market and support the regulator's stance.
Jeff Kirk
Leeds Building Society
No, I do not think the FSA's stance on whistle-blowing is tantamount to getting lenders to be responsible for brokers' actions.
The industry, as a whole, agrees we need to rid ourselves of any firm looking to submit fraudulent cases to a lender. With this in mind, I feel that the FSA's stance is a step in the right direction but would agree that a more systemic approach would serve the industry better.
Lenders already work together to keep each other advised of rogue intermediaries or those submitting suspect business and all lenders have a responsibility to whistle-blow on intermediaries submitting fraudulent mortgage business.
The majority of lenders already have robust systems in place to combat this issue and we need to ensure that the minority of intermediaries involved in such activity do not tarnish the excellent reputation currently enjoyed by the most innovative and dynamic mortgage market in Europe.
James Carter
Virtue Financial
The whistle-blowing debate appears to be being handled astutely by the FSA. It does indeed appear to be delegating regulation of brokers to lenders on this occasion but not in such a blatant way. To me, the problem of self-certification abuse lies mainly in applications for those who are employed.
I am sure the FSA is not happy with lenders accepting applications from brokers where a client is employed, as realistically, there should be no need for this. I believe its strategy here is to lean on lenders to tighten up their policy with regard to self-certification without publicly stating so. I am sure lenders are not so ignorant to believe that self-certification, for example, would not be abused on occasion but if the business is still coming in… This is obviously what the FSA is getting at.
Ray Boulger
John Charcol
The FSA, and also the Securities and Exchange Commission in the US, are increasingly relying on whistle-blowing to identify fraud and other contraventions of their rules. 80% of the complaints to the FSA about breeches of its financial promotion rules are from regulated firms and firms have an obligation under the Prevention of Crime Act and anti-money laundering regulations to report suspected fraud and money laundering.
Lenders have access to fraud prevention tools not available to brokers. Where they suspect broker collusion in a fraud they are much better placed, and usually more experienced, to identify suspected client fraud than the broker. It is clearly in the interest of every respectable firm, whether a lender or broker, to clamp down hard on fraud and if a lender suspects fraud on any broker-submitted business, it should remember the maxim of 'innocent until proven guilty' but report its suspicions to the broker's senior management for investigation. If material suspicion prevails after investigation it should report it to the FSA, as should the broker.
Matt Grayson
BM Solutions
Responsible lenders will, as a matter of course, check the quality of submitted applications. Lenders also work very closely with partner organisations in the market, such as networks, for example, to root out individuals who are not abiding by the laws. The fact is that 99.9% of brokers do a professional and excellent job. Therefore, there is a commitment across the industry to work together to get rid of the one or two people that could damage the reputation of the industry.
The FSA's move merely creates another channel to raise concerns about the performance of individual brokers. Given the press attention dedicated to the actions of the FSA, it is extremely important not to forget that the vast majority of brokers have adapted extremely well to regulation and continue to provide excellent mortgage distribution for lenders.