Brokers were warned yesterday at the Manchester Mortgage Business Expo that there is a risk that lenders will sue for losses caused by fraud, reports Mortgage Introducer.
John Malone, executive chairman of PMS said:
“They’re suing solicitors and surveyors already for mortgage fraud so I don’t see why they [lenders] wouldn’t sue the broker for being involved.”
Malone pointed out that professional indemnity doesn’t cover fraud, which makes the possibility of a lender claim a worrying option.
Mortgage fraud led to losses of £1 billion for lenders in 2011. As a result lenders have tried to recoup these losses by suing the solicitors and surveyors involved for negligence in the transactions.
It was argued by Robert Sinclair, director of the Association of Intermediaries that lenders may try to sue brokers for two reasons. These are firstly to compensate for the losses incurred, and secondly to penalise the broker.
Sinclair considered that it would be difficult to sue a broker for negligence, saying:
“I think it 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.”
As lenders continue to act to try to stop mortgage fraud, using risk management to limit panels, and acting to recoup losses, this may be the next step. Those involved in the industry should be aware of the possibility of action from a lender should a loss occur through mortgage fraud.
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