In 2006 the watchdog launched IFL, Information From Lenders, which it hoped would wheedle out fraudsters. It didn’t do that well – this week Bradford & Bingley revealed that of it’s £206 million losses, £18 million were thanks to mortgage fraud.
The FSA must have had a think, a really hard think to figure out who else they could turn to combat mortgage fraud. Eureka! two years later the quick-footed regulator asked mortgage intermediaries, who are at the centre of two thirds of all mortgages in the UK, to join them in the fight against mortgage fraud.
Many brokers have been incensed by this. Not because they are fans of mortgage fraud, far from it. It is because the FSA not only asked them two years too late, but they also insulted them – because spotting bad borrowers is part of the brokers’ jobs already.
The intermediary should check the facts and the intermediary should make sure that the borrower can pay the monthly repayments. The FSA even says it. In the statement this week it said: “we are simply asking firms such as yours to ensure you are doing what you are already expected to do”.
So in other words, do your job.
Intermediaries are not stupid, they know fraudsters affect the whole industry. The loses of B&B will be recouped by withdrawing good products. That means for all the products the lender pulls in the next few months, one in ten will be due to fraudsters. That’s less products on the market and less chance for brokers to place their borrowers. So that’s lost business. The FSA seem to forget that lenders and intermediaries are in it together.
And lenders should remember that. Brokers have complained that they are not given enough information by lenders, information which could help both parties identify and finger fraudsters. Lenders tell brokers as little as they can and the lines of communication are anything but clear much of the time.
The borrowers are the brokers’ clients and the broker is always honest and upfront. But the brokers are the lenders’ clients – so lenders should be honest and upfront also.
Holmes didn’t solve much without Watson, Batman always does better with Robin and lenders will be able to catch fraudsters a lot easier with brokers. And vice versa.