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.
The move towards working from home [has] resulted in reduced face-to-face interaction and greater reliance on documents could easily translate to greater incidences of mortgage fraud. Carlos Thibault
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".
He said the SMP's board "regularly reviews" how the pandemic is impacting intermediaries' ability to deliver high quality professional advice, and shares good practice on ways to spot cases of fraud.
Advisers can’t be ‘scapegoat’
According to anti-money laundering firm SmartSearch, almost half (48 per cent) of 500 regulated financial services, property and legal firms it surveyed between 2020 and 2021 experienced a rise in financial crime.
Adviser Shaw said part of the problem was companies which sell ‘party payslips’. “They advertise them for use in games, despite the fact they’re actually used to facilitate fraud. I’m shocked they can even trade.”
On the rise since 2018, mortgage fraud has prompted advisers to receive mounting warnings to run more rigorous ‘know your customer' checks.
But Shaw said it wasn't that simple. “Lenders’ systems are so highly developed. They’re process and AI-driven. The issue is that all these reports and this data is hidden, so advisers could be submitting dodgy business and not know. Lenders forget they’re plugged into HMRC, whilst brokers have to take documents at face value because they can’t tell the difference.”
Lenders seem to be in a challenging position of finding a scapegoat for potential or actual fraud.Bulent Kandemir
Bulent Kandemir, managing director of IntraPrivate Finance, agreed rising fraud levels were an issue facing lenders, and that advisers were vulnerable to becoming a “scapegoat” as a result.
Kandemir said being taken off a panel by a mortgage lender could end a whole of market mortgage adviser’s career.
In light of this, the adviser suggested: “Perhaps lenders should give access to their extensive searches prior to submitting an application, which would avoid mortgage advisers - some with very limited resources though sufficient to trade as an adviser - from getting caught out by professional fraudsters.”
But Kandemir is hesitant as to whether a trade union is the way forward, due to the fees this might impose on brokers.
“Clearly there will be a cost of running this type of a trade union, which the brokerages will have to pay for,” he said. “They are already drowning with fees from various official bodies.”
But ultimately, Kandemir said a trade union was worth considering if there are “no other options”.
Brokers need ‘soap box’
Rising fraud levels aside, some advisers believe a broker union is long overdue to give brokers a better voice.
Brokers need to be led by brokers.Martin Stewart, TMG director
Martin Stewart, a director of franchise mortgage advice network The Money Group, told FTAdviser “there is very much a need for this [union]”.
He continued: “I would suggest though that it’s nothing to do with spotting fraud, and more to do with ensuring brokers have a valid soap box from which their voice can be heard.”
Stewart argued a trade body or union “won’t stop fraud”, but it could help create an environment where “good practice and education are at the forefront of its agenda”.
He concluded that “brokers need to be led by brokers”, otherwise - loosely quoting George Orwell’s Animal Farm - he fears “the farmers will take over and tell the pigs how to be a pig”.
Graham Taylor, managing director at Hudson Rose, reckons a union to help represent brokers in the event of panel removals “is valid”, acknowledging the fight for enhanced wages or working conditions which is usually associated with unions are “not areas where brokers fare too badly”.
He added: “There have always been concerns that lenders are able to be judge, jury and executioner when it comes to panel removal – such is their prerogative - but it seems only just to offer a right of reply.”