The FSA is concerned that lenders are not properly vetting mortgage brokers before accepting them on to their broker panel.
In a thematic review looking at mortgage fraud committed against lenders, published last week, it says lenders should improve the way they manage their relationships with brokers.
It 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 says some lenders simply check the FSA register to vet mortgage brokers before entering into partnership with them. It says: “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.”
It suggests supplementary checks, such as researching a firm on the internet and arranging face-to-face meetings.
SPF Private Clients managing director Mark Harris says: “I think lenders have been guilty of just wanting business and not caring where it comes from but now I think the vast majority do care where it comes from and have a lot of data on arrears and business submissions. I think this could be a case of closing the stable door after the horse has bolted and a lot of lenders have got these checks and balances in place.”
Association of Mortgage Intermediaries director Rob Sinclair says: “Lenders should be diligent when reviewing their broker panels but any action taken should be appropriate and proportionate. A register of individuals operating in the mortgage market would be a welcome additional source of information to all mortgage firms.
“The AMI has long supported the adoption of such a register. We are disappointed that FSA has delayed the introduction of individual registration for mortgage sellers until at least 2013.”