Brokers could be subject to fraud checks

Nia Williams

October 1, 2010

The consortium is being put together by mortgage fraud consultants, CoreLogic Solutions, which is in contract negotiations with nearly 50% of the mortgage industry by volume of business.

It would not confirm which lenders had committed to being involved.

Lenders which are on board will provide anonymous back book mortgage data as well as data on new lending to the consortium which can then aggregate and identify fraud trends across the whole of the UK mortgage market.

CoreLogic already operates a similar consortium in the United States and is looking to replicate its success in the UK market. The firm says it will be able to tell specific lenders how fraudsters are targeting them, what types of fraud are prevalent in which parts of the market and where gaps are in lenders’ internal fraud checks.

The fraud consultants have also developed a product called Entity Surveillance which is a “risk solution based on proprietary fraud scores designed to assess the risk associated with the various entities involved in the mortgage origination process” including brokers, solicitors, advisers and surveyors.

CoreLogic said following the implementation of the approved persons register surveillance of this sort across the market could help to identify rogue brokers by assessing the quality of business they submit to all lenders in the market.

A Financial Services Authority spokeswoman said she would not comment on the specific use of this product, but said: “The extension of the approved persons regime aims to reduce mortgage fraud and unsuitable advice by allowing us to prevent unfit or rogue individuals from entering the industry to ensure that consumers are better protected.

“Any individuals undertaking the relevant activities will be accountable for their actions, allowing us to sanction those that fail to meet our requirements.

“The FSA made it clear through its review of the mortgage market that it wanted a strong, viable and clean marketplace and its requirement for mortgage advisers to prove they are fit and proper will help to remove dishonest individuals from the industry and to keep them out.”

Currently, lenders can flag suspicious brokers and subsequently share proven or suspected fraud information with CIFAS, the UK’s fraud prevention service.

However, CIFAS has no remit to process or analyse the information they hold on file.

A CIFAS spokesman said: “For frauds to be filed and shared with other members lenders must have amassed enough proof to enable them to take the case to the police. In other words there needs to be a burden of proof.”

The spokesman added that CIFAS’ official view of a consortium such as the one CoreLogic proposes would need to have a “shared standard that deals with facts as opposed to supposition or suspicion”.

Santander’s chief credit officer, Iain Laing, said Corelogic was just one of a number of firms looking to aggregate data in this way. He said the consortium would have a different appeal to lenders depending on how exposed to fraud they were.

“CoreLogic’s proposal is logistically very heavy weight in terms of having a lender shift over all its data and the controls we would have to put in place to protect our customers’ privacy. I would say that for a lender like ourselves where fraud isn’t a big problem, this looks like a sledge hammer to crack what is a very small nut in our view.

“However, I do acknowledge that none of us lenders sees more than about 30% of the market. Fraud starts small and then if successful it spreads very quickly across the market. I can see the logic in a consortium from that point of view if you’re a lender with an expensive fraud problem.”

Spokesperson from Lloyds Banking Group said: “Fraud is an important issue for all lenders and there are already a number of very good industry initiatives underway to help prevent it. We are certainly broadly supportive of any work that helps the industry tackle the problem by sharing knowledge and best practice, although currently we are not actively working on this particular project.”

The Council of Mortgage Lenders was unable to comment on CoreLogic’s consortium specifically, but said: “The CML is generally supportive of anything that helps in the fight to combat mortgage fraud. Not all systems will be suitable for all lenders, and it is a combination of different measures that is most likely to achieve the best outcome.”

Angus Stewart, chief executive of fraud software provider, e solutions, said: “Personally I think sharing data in this way is a good idea. The market needs someone to pull information together, analyse and act on it. How effective that will be in practice however is always going to be challenging, but pending strict controls on the risk of abusing that data, the principle sounds pretty sensible.”

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