‘Broker union’ floated as advisers fear rising mortgage fraud

‘Broker union’ floated as advisers fear rising mortgage fraud

Advisers have floated the idea of a ‘broker union’ to protect themselves against rising levels of mortgage fraud which, some fear, could add to a perceived “imbalance” of power between them and the lenders they work with.

Currently, lenders have the power to remove a broker from their panel if, for instance, they submit a mortgage application propped up by fraudulent documents or data.

Some advisers worry that as fraudsters become more sophisticated, there's a risk more brokers could be struck off without even realising they’ve taken part in fraudulent activity.

“I think we should set up a mortgage broker union, I think there’s some merit in it,” Lewis Shaw, founder of Shaw Financial Services, told FTAdviser.

“A lender can take you off their panel like that. There’s no real recourse to do anything about it and that can be the end of someone’s career. There’s such an imbalance [of power].”

He said many brokers “don’t know” what existing organisations such as the Intermediary Mortgage Lending Association and the Association of Mortgage Intermediaries do for them, which means they feel that it is up to them to represent themselves.

He has begun to approach other brokers in the industry with a mind to set up a union.

IMLA declined to comment on the suggestion, whilst Robert Sinclair, chief executive of the AMI, said he acknowledged the rise in fraud across the UK property and mortgage market.

"I get the fear, it’s a murky world out there and organised crime is getting closer and closer to the property market," he said.

But he also said brokers were not as alone as they might think, highlighting the fact that since 2015 lenders have had to - thanks to an agreement negotiated by AMI and UK Finance - consult an independent panel as part of a more rigorous review process before striking a broker off.

This was in an effort to quell the number of brokers struck off between 2012 and 2015, which rose to 2,000. Today, Sinclair said around 75 of the UK's estimated 18,000 mortgage brokers are struck off because of fraud each year.

Occasionally, Sinclair sits in on disputes between brokers and lenders. He said the vast majority of cases were about a broker missing something fundamental.

"When you look at their due diligence and they admit they accepted a photocopy and never met the client, you throw your hands up in the air and say 'you expect me to defend you?'"

Whilst AMI represents broker firms, individual brokers are represented by the Society of Mortgage Professionals which is run by the Chartered Insurance Institute.

Carlos Thibault, chairman of the professional body, acknowledged the move towards working from home had resulted in reduced face-to-face interaction and greater reliance on documents, which "could easily translate to greater incidences of mortgage fraud".