Multi Lender Cascading

This is when a borrower is offered different products from a range of lenders when they do not qualify for their first choice or recommended mortgage. This practice is governed by Financial Services Authority (FSA) rules and is essential to ensure the most appropriate product is selected for a client. 

Clearly this will take more time and effort from a broker.

The necessity to carry out a multi-lender cascade may be due to an initial application or decision in principal being declined, usually resulting from some of additional adverse credit being uncovered when making a CRA check. Rather than the mortgage application ‘cascading’ to a different (more expensive) product offered by the original lender, it cascades to all suitable lenders. The likely result is that the new available product(s) is cheaper than the single-lender cascaded rate. Many brokers ignored this practice.

The FSA MCOB rule 4.7.12 states: -

‘Where the scope of the advice provided is based on a selection of regulated mortgage contracts from a single or limited number of lenders, the assessment of suitability should not be limited to the types of regulated mortgage contracts which the firm offers. A firm cannot recommend the 'least worst' regulated mortgage contract where the firm does not have access to products appropriate to the customer's needs and circumstances. This means, for example, that a firm dealing solely in the sub-prime market should not recommend one of these regulated mortgage contracts if approached for advice by a customer with an unblemished credit record’.

Click here for the example of Mr and Mrs Johnson.