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Lenders Witch Hunt Against Brokers
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Lenders must call off this witch hunt against brokers
As an independent network consultant I am becoming increasingly concerned with the number of “witch hunts” undertaken by lenders presumably under pressure from the FSA. The FSA often seem to persecute brokers for very minor infractions of the banks or building societies rules rather than acts of mortgage fraud or breaches of FSA regulation. One recent case I came across, and the case which prompted me to write this letter, was a broker whose agency with HBOS had been terminated because they considered he had submitted too many AIP’s to their system which had not been taken up.
The first thought that occurs here to most reasonable people here is why didn’t HBOS simply tell him to stop? We are not talking about some fraudulent activity here, and I can remember from my time as an independent mortgage broker BDM’s from the lenders standing in front of brokers at seminars saying things like “The great thing about our new electronic AIP system is that it doesn’t leave a footprint on the clients credit file, so if you are not sure if the client fits the criteria for one of our mortgages, just run it through the AIP system, and if it doesn’t fit then there’s no harm done”.
I am aware of the argument that some brokers could be using this type of system as an aid to mortgage fraud by checking if a client would be granted a mortgage on say a £20,000 salary, and if not then putting it through again with £25,000 salary, and if that doesn’t work putting it through with £30,000 salary. However, you would have to be a pretty stupid fraudster to do that, since this would raise so many red flags on the client file. Of course a more intelligent fraudster could use another name for the client, but it would have to be for someone with the same credit score as the client for the exercise to have any meaning. Also, with any type of half decent monitoring system, it is easy to spot this type of repetitive activity as opposed to just too many random AIP’s.
This of course brings me to the other major problem for brokers targeted in this way, which is their right to put up a defence. How are you supposed to deny an accusation when it’s impossible to get any details regarding the alleged offence? In the vast majority of cases, any questions to the lender will be met with the stock answer “We cannot discuss individual cases”. How can this possibly be right when the accusation must come down to an individual or series of individual cases.
Since it involves the broker’s clients, and it was the broker who submitted the case or cases initially, it’s preposterous that a lender can hide behind data protection legislation that surely does not apply in this type of case. Can you imagine anyone putting up with this type of logic in the criminal court system? “Mr Smith you are accused of theft, we can’t tell you what you stole, or when this happened, or where this took place, but you’re guilty anyhow, and your sentence will be, to be thrown out of your chosen profession for life, you will have to give your car back, take the kids out of that nice school they are in, lose your home, and the pressure could possibly cause your divorce, all this contributing to a downward spiral in your life ending with you sleeping alone in a shop doorway. So let this be a lesson to you and don’t do it again. Whatever it was?”
Morally, again why should a lender have the power to effectively write off a persons business, and often years of experience and training without even having to explain their argument? Sorry but this is just plain wrong.
I am completely against mortgage fraud, to the extent that where a broker is proven to have deliberately falsified key data to obtain a mortgage that a client shouldn’t have, then I am in favour of prosecution. This is fraud end of discussion. But this is different, and potentially disastrous for the broker. What may not be obvious is that if a mortgage broker is terminated by HBOS, because they now control almost 40% of the intermediary prime products, the broker’s network will invariably follow suit and also terminate them. This in turn means that if the broker then attempts to join another network, the termination is in their reference and the new network won’t take them on, in many cases effectively forcing them out of financial services completely..
I can of course see that in the current climate lenders have to be seen to be spotlessly clean but wrecking good people’s lives because of a transgression of some petty rule that actually didn’t exist at the time of the alleged offence and then not allowing them any practical defence? That’s just a witch hunt.
Gary Watts
Mortgage Strategy 17th July 2009
