Mortgage News
FSA scrutinises 20 lenders in mortgage fraud crackdown
The FSA has revealed it is to visit 20 retail lenders to ensure they have robust internal systems in place to manage mortgage fraud.
In a speech at the British Banking Association (BBA) Conference yesterday, Margaret Cole, director of enforcement and financial crime at the FSA, said the visits will stamp down on sales targets and incentives after finding that they were a key cause behind mortgage fraud becoming so prevalent.
Cole said that targets and incentives had lead to lending decisions that were not in the interest of the lender and in “extreme cases” had resulted in staff colluding with customers to mislead the lender into granting a mortgage.
Cole said: “As part of the thematic review we are visiting twenty retail lenders to examine whether their internal systems to manage fraud risk are sufficiently robust, and to ensure incentives offered to salespeople do not undermine efforts to contain fraud.
“It will also help us understand what lessons have been learned from past instances of mortgage fraud.”
The thematic review continues the increasing scrutiny that the FSA is placing on mortgage fraud, which has lead to more than 100 mortgage advisers being banned since 2008 and fines of more than £2m.
Episode 2: Affordability : Powered by Partnership podcast from Newcastle for Intermediaries
Sponsored by Newcastle for Intermediaries
The results of the review will be published next year.
In addition, Coles welcomed the initiative from the Inland Revenue to share information with mortgage lenders and said that the FSA’s own Mortgage Market Review proposing lenders verify income will discourage applicants from inflating their incomes on applications, so helping to reduce mortgage fraud.
She highlighted the HMRC pilot last year that allowed lenders to check mortgage applicants’ income details, which she said helped to prevent £111m-worth of mortgage fraud.
Coles concluded: “We will remain committed to our agenda for preventing and fighting financial crime. The regulator and the regulated have mutual interest here so we continue to encourage you to assist us, both in your own self interest and in the interests of consumers and society at large.
“Where we find failings in systems and controls we will continue to use our enforcement tool to reinforce the standards we expect to see. And we will remain focused on the credible deterrence strategy to show that we mean business using all the powers we have available to us.”