Speaking at Manchester Mortgage Business Expo yesterday John Malone, executive chairman of PMS, admitted that we could get to a situation where lenders sought recompense from brokers who had contributed to proven mortgage fraud cases.
He said: “Why would a lender not sue if they know that a broker has been at it fraudulently?
“They’re suing solicitors and surveyors already for mortgage fraud so I don’t see why they wouldn’t sue the broker for being involved.”
Lenders lost £1bn to mortgage fraud in 2011 and there have been several cases of banks suing surveyors for overvaluing property they then lost out on.
Robert Sinclair, director of the Association of Intermediaries, said there were two reasons lenders may choose to go down this avenue – to penalise the broker or to compensate themselves for losses.
And he added: “I think that would be an interesting challenge and the broker would have to be party to the fraud. I can’t see a situation where lenders would sue over false documents for example if the broker didn’t know.”
Professional indemnity doesn’t cover fraud and Malone said this made a lender claim against a network responsible for an appointed representative who had committed fraud a scary prospect.
And he added: “That is a very big question and I think it’s something all networks are fearful of, not just on the mortgage side but also in other aspects of financial services because the network has the responsibility.
“That would be the natural place for the product provider to go.”
