Industry reacts to broker fraud claims

On Friday, Mortgage Business reported that Veda statistics showed credit application fraud is now at its highest level since 2009 with a 27 per cent increase in total cases last year.

Commenting on the result, Veda’s general manager of fraud & identity solutions Imelda Newton said there has been a trend among brokers to act in collusion with others to defraud lenders.

“What we see through some of the third-party channels tends to be more organised crime with collusion between parties,” Ms Newton said.

“That is what the data is suggesting,” she said.

MFAA chief executive Phil Naylor has hit back at the claims, noting that the above statements are not supported with evidence.

“We have a very rigorous disciplinary process and in the past decade only around 30 members have been expelled for fraud related conduct and not all of those were necessarily involving borrowers,” Mr Naylor told Mortgage Business.

“Likewise since ASIC has had control of regulation and enforcement in the credit industry (2010) the numbers of brokers banned or otherwise sanctioned for fraud matters has also been relatively small,” he said.

Speaking at the MFAA National Convention earlier this year, ASIC deputy chairman Peter Kell said the regulator has banned 42 persons (19 permanently) since the introduction of the National Credit Act.

“Almost half of these bannings relate to instances where persons submitted falsified documents to lenders,” Mr Kell said.

“We have also recently been successful in obtaining several criminal convictions for loan fraud, which indicates the seriousness of this activity,” he said.

“There are more such matters in the pipeline, as we send the message that loan fraud is unacceptable.”

Clearly, dishonest operators are the exception when one considers there are approximately 5,800 licensees – with approximately 4,400 self-identifying as a finance broker or mortgage broker – and over 30,000 authorised representatives, Mr Kell said.

“While some may see it as unfortunate that rogue brokers make the headlines, it sends a positive message to consumers that these operators are being identified and removed from the industry,” he said.

Homeloans Ltd general manager of sales Ray Hair said he has not seen any evidence of an increase in mortgage fraud among brokers.

“There are always going to be a few bad apples out there, and any broker who thinks it is worth fudging numbers in order to get a loan through is playing a pretty short-term game in terms of their livelihood,” Mr Hair said.

“Nobody condones that, but unfortunately it is the nature of the beast of all sales type industries,” he said.

“There will always be somebody who tries to push the envelope, so to speak, but the vast majority of brokers work tirelessly to help their customers achieve the dream of home ownership.”

David Ure, head of contact centre and intermediaries at Heritage Bank, said there are definitely criminals out there looking to defraud banks via organised collusion involving some brokers.

“However, there has been an extremely low incidence of this type of mortgage fraud happening at Heritage,” Mr Ure said. “There are a number of reasons for that,” he added.

“First, the frauds tend to be aimed at non-bank lenders who may not have the resources or procedures in place to detect the problems.

“Second, Heritage is selective in the broker partners we deal with, and we develop extremely strong relationships with them.

“That allows us to put in place checks and balances that enable us to work together with our partners and with broker industry bodies to identify potential issues early."