An initiative was launched yesterday to reduce the number of fraudulent mortgage applications being made through brokers.

The Financial Services Authority (FSA) is joining forces with mortgage lenders in a bid to spot intermediaries, who arrange mortgages on behalf of lenders, who are submitting fraudulent applications.

Under the initiative, which is being supported by the Council of Mortgage Lenders (CML), mortgage firms are being asked to pass on information to the FSA if they suspect a fraudulent application has been made through a broker.

The FSA will them investigate the application to see if fraud has taken place. It hopes the new system will enable it to spot brokers who are repeatedly submitting fraud-ulent applications, as well as one-off incidents.

Examples of mortgage fraud range from encouraging applicants to inflate their income so that they can borrow more, to using forged documents such as bank state-ments, utility bills and passports to support an application.

The regulator is looking both at cases where the mortgage broker has been aware of the fraud, as well as incidents where they failed to spot it.

It said it thought mortgage fraud carried out through intermediaries was "quite a significant problem", although the exact scale of it was not known, and it hopes the new initiative will reduce the opportunities for fraud.

The scheme has been piloted among a number of lenders, and the FSA is now inviting all lenders to take part in it.

During the pilot four intermediary firms were referred for possible enforcement action on the basis of information supplied by lenders.

Stephen Bland, director of the FSA's Small Firms Division, said: "We very much appreciate the input and cooperation of the CML and lenders in this important initiative.

"It is the first time we have used information of this type in this systematic way, and it is an example of our strategy of working with the market to supervise small firms working effectively in practice.

"Mortgage fraud is a serious matter and can lead to criminal proceedings both for intermediaries and mortgage applicants. We are looking to all lenders to help us in the fight against this practice."

Michael Coogan, director general of the Council of Mortgage Lenders, said: "We welcome and support this new, co-ordinated approach to collecting information on fraud.

"We hope that it will make it easier for the FSA to identify systematic suspicion and act quickly upon it."