Market Watch

Name: Andy Pratt

Company: Alexander Hall

4In my view, both parties have their own individual responsibilities and a broker firm cannot waive its responsibility either to the client or, contractually, to the lender and certainly cannot pass the buck to the lender for failing to do its part. That said, if the broker has undertaken a proper affordability check and the lender subsequently discovers or should have discovered something amiss, it cannot pass the buck back to the broker.

There are three separate considerations here. First, a broker has a duty of care to the client - this extends to ensuring they do not make a recommendation the client will not be able to afford or support.

Second, the lender has an explicit regulatory requirement to assess affordability, although this extends only to posing the right questions on income and expenditure and a sense check on whether the stated income matches the client's occupation.

The third point is that many lenders attempt to build in some delegation of responsibility to the brokers, especially lenders who only distribute through the intermediary sector. This is prevalent in the sometimes onerous contracts set by lenders. Where this exists, as it is a commercial contract, it should be binding on the broker, so long as the lender still upholds its own regulatory requirements.

The lender should also be vigilant and operate a risk-based monitoring process. nName: Steve Teague

Company: Click

4Application fraud is a major issue for the lending market, and at Click we take it very seriously within our secured loan broker firm.

While brokers have a statutory obligation to operate with 'due skill care and diligence', any successful brokerage is as likely to be driven by the sheer waste of time allowing false applications to progress. That is not to say that the broker alone has responsibility - teamwork and good communication are required with the lender in order to be fully effective. The lender is after all receiving remuneration as part of the supply chain and as the provider of the credit has a lot to lose.

The broker is often a client's main point of contact and has an ideal opportunity to check out discrepancies in an applicant's story either face to face or over the telephone. This is not rocket science and there have been stories about firms who have uncovered homemade pay slips, dodgy accountants' letters and female partners pretending to be applicants' husbands and vice versa.

If any broker does little or no checking or turns a blind eye to anomalies, this is a pretty clear abdication of responsibility. It also offers an obvious loophole for fraud, which via word of mouth will undoubtedly guarantee a flood of false applications.

Every good broker should do everything they can to stop fraud from sullying the industry's reputation with the media and consumers alike. n Name: Paul Winter

Company: Ipswich Buidling Society

4While lenders make every effort to uncover fraudulent activity, I do not think that it is fair to place the onus entirely on their shoulders.

We rely on intermediaries to do all that they can in this area. The part of the CeMAP qualification concerning money laundering and the obligation to look out for dubious documentation is not there for appearance only.

It is there to remind brokers as well as lenders they have a duty to do all they can to ensure documentation is bona fide before it is passed on.

Intermediaries that fail to take basic precautions in this area are taking a big risk that an application may come back to haunt them. The removal of Yvonne Spring of Earlybird Finance from the FSA register (mortgagesolutions-online.com, 04/07/07) is a cautionary tale for everyone in the industry.

Removal from the register is pretty punitive, given that it prohibits her from taking part in all regulated activity, but the FSA may have wanted its action to send a signal out into the wider community. It obviously takes this issue very seriously, as everyone should, and is determined to come down hard wherever there are instances of inadequate procedures.

As the FSA has stated, mortgage brokers must take adequate steps to prevent the submission of mortgage applications that contain false or misleading information. Brokers cannot pass the sole responsibility for identifying potentially fraudulent mortgage applications on to lenders. n