FSA wants increased action over mortgage fraud

Over recent months it seems that mortgage fraud related activity has become rife, and amongst the problems that have arisen from the global credit card crunch and the lack of available mortgages is the issue of some brokers putting falsified information on the applications of customers in order to increase the chances of getting mortgage loans. A number of brokers have already been fined or banned for this sort of activity in the past few months alone, and now the Financial Services Authority has demanded that something is done about the problem.

Officials from the FSA have told lenders that they need to increase and improve their defences when it comes to fraudulent applications, adding that the FSA is already targeting around two hundred broker firms to ensure that proper checks and procedures are in place. The FSA is concerned that many lenders may be failing to properly protect themselves against this sort of fraudulent activity.

Philip Robinson, director of the FSA’s financial crime and intelligence division, said: “The FSA continues to take very seriously the question of whether lenders’ systems and controls for dealing with mortgage fraud are proportionate to the risk. We are likely to take particular note of cases where weaknesses in due diligence and customer checks – or in outsourced relationships with third parties – may have contributed to a heightened mortgage fraud risk.”

The move was welcomed by the Council of Mortgage Lenders, and on official from the CML said: “People may not think of lenders as victims of crime, but unless fraudsters are tackled then honest customers are the ones who end up paying more. We expect that even more lenders will now participate in the voluntary initiative designed to identify and investigate broker fraud.”

Restrictions on lending from smaller lenders

A number of smaller lenders have recently announced that they are cutting back on their lending, as they struggle to try and meet demand for finance on limited funds from the wholesale money markets. Lenders have been finding it notoriously difficult and expensive to secure finance to fund their lending, and as a result of this have had to be far more careful over who they will lend to and how much they can lend out to potential borrowers.

A number of smaller building societies have recently stated that they cannot keep up with demand for mortgages, and are having to make a number of cutbacks in order to avoid huge risks. Some of these lenders have had to withdraw a range of products from the shelves, and many have placed various restrictions on their lending, including restricting new unsecured lending on credit cards and also only taking on local consumers as new customers.

One smaller building society, the Tipton and Coseley, said that whilst they had a lot of interest in their product, they had to restrict new lending to local consumers only. An official from the building society stated: “We were getting a lot of calls from around the country and we wanted to make sure that people locally can get them. Loan lenders are withdrawing rates and increasing them and limiting the percentage they will lend on. We are a bit loathe to do that and it is to make sure we don’t have to that we are restricting borrowing to people in our area.”

Another official from a different small building society explained the problems that many smaller lenders were having, stating: “Wholesale money is difficult to get and we have come to a standstill at the moment. We are hoping it will just be for a month, but we have taken on so much we have just run out of money to lend at the moment.