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FSA/PN/039/2006
12 April 2006

Mortgage lenders and the Financial Services Authority (FSA) have joined together to set up a streamlined reporting system designed to reduce the level of fraud involving loan applications handled through mortgage intermediaries.

The initiative, which has the support of the Council of Mortgage Lenders (CML), has been successfully piloted with a number of lenders and the FSA is now inviting all lenders to take part. The FSA is interested in fraudulent mortgage applications where the lender considers the matter sufficiently serious to remove the intermediary from their panel or where a subsequent investigation identifies fraud. It would like lenders to supply the following information: the name of the intermediary; details of any individuals involved; details and evidence of the fraud; the names of the customers involved; and summary of investigations. On the basis of information supplied so far under a pilot reporting system four intermediary firms have been referred for possible enforcement action.

Stephen Bland, Director of FSA's Small Firms Division, said:

"We very much appreciate the input and co-operation of the CML and lenders in this important initiative. It is the first time we have used information of this type in this systematic way, and it is an example of our strategy of working with the market to supervise small firms working effectively in practice. Mortgage fraud is a serious matter and can lead to criminal proceedings both for intermediaries and mortgage applicants. We are looking to all lenders to help us in the fight against this practice."

Michael Coogan, Director General of the Council of Mortgage Lenders, said:

"We welcome and support this new, co-ordinated approach to collecting information on fraud. We hope that it will make it easier for the FSA to identify systematic suspicion and act quickly upon it."

Rob Griffiths, associate director of the Association of Mortgage Intermediaries (AMI), said:

"We’re delighted to support anything that reduces mortgage fraud as fraud is detrimental to the entire industry. AMI takes mortgage fraud very seriously and has produced member guidance in the form of our ‘Fraud Prevention’ factsheet which is available from the AMI website."

Examples of mortgage fraud include:

Proven Fraud

• Fraudulent documentation, for example bank statements, utility bills, wage slips, Passports, Driving Licenses etc;
• False employment or income details;
• Inconsistent information relating to the same applicant, i.e. various applications made with different incomes/details either to the same lender or lenders within a group.

Suspected Fraud

• Doubts over income and employment details;
• Links with other applicants where fraud is suspected, for example shared addresses, purchases on same development, identical loan amounts etc;
• Links between different mortgage applicants, for example shared bank accounts, and addresses;
• Applications cancelled when further information/verification is requested;
• Suspected fraudulent documentation.

Notes to editors

1. Reports from lenders should be clearly marked 'Information From Lender – Mortgage Intelligence' and sent to the FSA's Firm Contact Centre at fcc@fsa.gov.uk . If firms have any queries about the new system they should contact Simon Compton or Dominic Clark on 020 7066 1000.
2. Further details of the new reporting system are available on the FSA Website.
3. The FSA wrote to mortgage lenders in February 2004 (see Dear CEO letter: Mortgage application fraud [PDF]) setting out its position on mortgage application fraud.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness