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FSA orders lenders to improve broker vetting

The FSA says it is concerned lenders are not properly vetting mortgage brokers before accepting them onto their broker panel.

In a thematic review, published today, looking at mortgage fraud committed against lenders, the FSA said lenders should improve the way they manage their relationships with brokers.

The paper says: “In the past few years, there have been substantial improvements in lenders’ oversight of some relationships, particularly those with solicitors.

“However, there is scope for significant improvement in how lenders manage relationships with brokers.”

The FSA claims some lenders simply check the FSA register to vet mortgage brokers before entering into partnership with them.

The paper adds: “Checking the FSA register can be the first step of a due diligence process but it cannot be regarded as sufficient to provide complete assurance.

“Recent FSA enforcement action has shown very clearly that even FSA approved brokers do not always act with integrity or take steps to mitigate mortgage fraud risk. Lenders must take steps to satisfy themselves of a broker’s suitability on an ongoing basis.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. If we cannot rely on the regulator to register persons of appropriate standing what chance have we got? The Lender appears damned if they do and damned of they don’t.
    They want everyone but themselves to take reponsibility and this appears another sledgehammer to crack the nut and another regulatory requirement to justify the regulator’s existence.
    There will always be “bad apples” and over regulation will not stop them, only challenge their ingenuity and stifle the industry and real risk assessment by lenders.

  2. Another “get out of jail free” clause for the unaccountable regulator.
    What is the point of having an FSA register if it cannot be relied upon.
    If the FSA authorised the firm in the first place then it must share some responsibility.
    If I recommend a product to a client, I must, under FSA regulation, take responsibility, even if the provider has used lies and deceit in the supporting literature.
    This lot are a complete waste of space, time and our hard earned cash.
    The regulator seeks to impose upon the regulated rules it is unwilling to live by itself. Total hypocracy!

  3. Regulator or not, I don’t see how the idea that checking an entry on another organisation’s website satisfies due diligence, can stand up to scrutiny.
    Lenders clearly need to take responsibility for where they put their depositors’ money; or hang the consequences…

  4. Who rattled the FSA’s cage today, they seem to slinging a lot of mud today in the vain hope some will stick !!

    Maybe the letter from DC was a right royal kick up the back side, and they feel the need to vent some frustration,

    It’s not us gov it’s those bloody IFA’s & brokers, just because they are on our register dosnt make them fit and proper !!

  5. compliance man 22nd June 2011 at 2:33 pm

    The FSA only authorise firms once they pass their fit and proper checks and it would therefore seem reasonable for firms to consider this when agreeing to take applications from an intermediary.
    It does not mean that the FSA will always get it right but it is a starting point.
    If this were the only check and business submitted sailed through underwriting then that may be an issue. However, lenders should underwrite the applications received regardless of any information provided by the intermediary – i.e. arms length and not the turn a blind eye no questions asked basis pre credit crunch.

    Assuming it is properly underwriting and lenders track the performance/quality of the deals introduced by each intermediary then this should work as a two pronged approach.

    No matter what checks they do in respect of looking at the people in the first place they will have the same information and same problem that the FSA have in assessing them. Only reviewig business quality will actually give them the answer.

    So the FSA have got this wrong. It isn’t the initial appointment that is so important, it is more the ongoing monitoring that counts

  6. Not only should a lender check on brokers but
    should also closely check on mortgage application forms for accuracy. This requirement should have been asked for in the late eighties !

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